Private-Credit Defaults Expected to Drive 2026 Stress, UBS Says

Credit stress is expected to rise next year as more borrowers grapple with the effects of inflation, higher interest costs and a weakening consumer. But private credit might see the worst of it.

Private credit defaults could climb by as much as 3 percentage points in 2026, outpacing anticipated increases for leveraged loans and high-yield bonds, according to a report from UBS Group AG. Defaults for the latter two sectors are expected to increase as much as 1 percentage point next year, strategists led by Matthew Mish wrote in the report.