Ronnie
Hey, everybody. Welcome back to the Barclays Brief. It’s Ronnie, and I have a very special guest here in the studio with me today. Brad Rogoff is our Global Head of Research. He’s also the host of our sister podcast, The Flip Side. And he happens to be someone that I rely on constantly and talk markets with 24/7.
Brad, it’s great to have you here.
Brad
Thank you for having me, Ronnie. Thank you for letting me use my favorite microphone in the studio that I use for The Flip Side all the time—but this time I don’t have to come up with all the questions. You do. So fire away.
Ronnie
Yeah, you just have to come up with the answers.
Brad
It’s fine.
Ronnie
So let’s get right into the credit markets. You just published your 2026 outlook. As an equity market participant, I focus tremendously on the credit markets—particularly in times of stress when debt capital markets seize up. You know there’s sort of a problem out there. We’ve had some very relative calm in credit markets all year.
Ronnie
Do you expect that to continue?
Brad
Yeah, it’s interesting because if you think about the last few months, there’s been a little bit of noise in credit markets, especially on the capital markets side of things and the new issue side of things—maybe things are getting a little bit spicier. But then if you look at actual spreads, your relative calm comment, I think, is spot on.
Brad
Over the last six months, obviously there was less calm around Liberation Day like in all markets. But look, over the last six months, the max spreads in the credit market are as low as they’ve ever been—the U.S. IG market as an example. So what do we think for next year? We think there’ll be a little bit more volatility.
Brad
But it’s not going to be on the order of some of the crazier periods that we’ve seen. Marginally wider spreads are our forecast pretty much everywhere across the globe. And that’s kind of the behavior you often see in this late-cycle extension. And I think that’s what we’re going to be in next year.
Ronnie
Yeah. So, let’s slice it up geographically. Obviously, we’re both very focused on the U.S. markets living here. But what do the opportunities look like, related to each other, across the different geographies we track?
Brad
When we talk about the U.S., I think the place that probably looks the most attractive right now and interesting is really the triple-B portion of credit. So if you look at high yield, there’s a lot of idiosyncrasies. And we’ve actually seen somewhat elevated single-name volatility considering what we just talked about—the overall volatility is fairly low.
Brad
But you look at triple-B—the investment-grade market has gotten a little bit better quality over time. There’s a bit less of it. And yes, we do expect some fallen angels and the like. But still, I think there’s some opportunity there where spreads look attractive relative to singles on the higher end and double-Bs on the lower end.
Brad
If we look globally, a year ago we were pretty focused on Europe and thought there should be substantial outperformance opportunities relative to the U.S. This year, we think there’s opportunity for outperformance, but it’s a lot smaller. Europe looks a little bit cheap, assuming some of the growth momentum persists—even though it won’t be as good as the U.S., likely.
Brad
And then if we look across the world and think about EM, we think the high-yield portion of EM is actually one of the interesting areas for those willing to take more risk.
Ronnie
Let’s switch gears a little bit. Credit market structure has really taken a step forward in this calendar year. Can you talk a little bit about the portfolio trading dynamic, the equitification of credit, all of these things that are driving the changes in the way people transact? And do you think they’re volatility dampening? Do you think they’re volatility enhancing? How do you kind of put that all together?
Brad
Well yeah. Equity—you guys got to ask me about the equitification of credit? That makes total sense. And it really does matter actually. And what we are seeing, I do think it’s very helpful in not just the way the market is trading, but where spreads are overall.
Brad
So if you think about portfolio trading, really what it does is it allows the ability for people to transact across a huge number of credits. And by doing that, they’re able to move their portfolio flows with a much tighter bid-ask than they were able to do historically. And if you’re able to do that, then the liquidity premium that was in a lot of these bonds that really didn’t trade frequently—think about as an equity side, you got one ticker, right?
You might have 30 different corporate bonds for that same issuer. But if all of those are now trading and there’s less of these off-the-run type bonds, there needs to be some extra spread premium in that lack of liquidity. Well, then spreads should on average be tighter. And I think that’s part of what we were talking about in the beginning—how there’s a little bit less volatility and a bit tighter spreads.
Brad
And then the last thing I would say is I think it’s part of the reason why private credit has taken off, because if you can’t get any kind of illiquidity premium or very little illiquidity premium in these public credit markets, then you got to go to private markets.
Ronnie
Right. So, before we spend more time on private credit, because we will get there I’m sure, we’ve previously covered the AI infrastructure build-out and what it means and how it’s spilling over into corporate credit markets. There was a period of time where Andrew Keches described the market as overwhelmed by a lot of this supply. Where are we now? And do you think the risk of the market being overwhelmed because these spending plans are gigantic can come back into focus in 2026?
Brad
Yeah, well, look, this AI stuff—this was just an equity story a year ago. I mean, no one in credit markets really cared. A lot of these big tech names were the least volatile parts of credit markets because they have essentially no leverage. That’s starting to change, obviously, with the CapEx plans. And if you talk about one of the main reasons that we think you will see some widening in credit markets in 2026, it’s because net supply is going to be a lot larger than it was in 2025, and that’s got to have some impact on markets unless you have out-of-control demand.
Brad
And we think demand will be okay, but we’ll be forced a bit wider by the supply. And so on the AI front specifically, look, we’re a few weeks past some of those big deals that you mentioned. So does the market feel this moment like it says, overwhelmed? No, it probably doesn’t. But if we think about it more broadly and the amount that has to come next year, this is where you need all these markets.
Brad
We will do a lot of it in public markets and it will be able to digest it. But there will be new issue concessions when that happens. But you also need other options in order to finance all of this.
Ronnie
So let’s do this private markets thing. Private credit is the buzz phrase. It’s a $2 trillion new gorilla in the market. When you think about some of the concerns—opacity being one of them, industry concentration being another—where do you shake out? How do you think about the risks here?
Brad
Yeah. And so you use the $2 trillion number—the $2 trillion number. And we can argue if it’s exactly correct or not. But that is really the leveraged finance side of things. There are plenty of people that will come up with different numbers that are 10 and 20 times that for the overall private credit market, including investment grade as well.
Brad
And I think it’s important to look at both of those. If we look at the leveraged finance private credit market, it looks a lot like something like the U.S. leveraged loan market, just with a little bit more leverage often and slightly different deal structure. And there are risks that come with that—payment in kind or PIK on a lot of those loans. Those are risks we can understand and model. Sometimes the pricing is a little bit tighter than you’d like for those risks.
Brad
What’s becoming a bit different is as we expand this investment-grade side as well, you’re seeing different types of structures. A lot of the funding of AI is going to come in an off-balance-sheet fashion for these issuers where they’re setting up certain vehicles, SPVs, or things that do have real collateral but are very concentrated risk as opposed to risk for the overall corporate.
Brad
And you look at that market and then you look at the $2 trillion market—the leveraged finance side of it. The concentration is huge in the tech side today. It’s all software and all of those things. So where do the risks wind up being? If you have a decline in enterprise value and multiples for tech names, that’s where things spiral out of control—not because of something endemic to private credit.
Ronnie
And how do we track and monitor that for our listeners?
Brad
I think the easiest way for people who don’t have some of the tools is looking at things like BDCs. If you think about the private credit market on the leveraged finance side, BDCs are over half a trillion dollars at this point. Somewhere between a quarter and a third of the market at a minimum is BDCs. And you can get information on BDCs—they do filings. So, if that exists, you can track the market enough and it’s not as opaque as people say.
Ronnie
Okay. Last question. As a credit person, you’ve been classically trained to think about what can go wrong, a little bit differently than how they teach us on the equity side. But let’s talk about it. What could go wrong? There are a lot of balls in the air. There are a lot of cross-currents in markets and the economy. What could go wrong?
Brad
I think the financing side of things that we just talked about is the starting point for it. Because it’s not just traditional corporate credit markets that are financing a lot of this stuff. Now you’re also seeing it go into asset-backed markets. We’re seeing huge growth there. And so I think that’s where I worry—that we have these tentacles in all of these different markets. From a financing standpoint, there are risks associated with that.
Ronnie
Brad, it was awesome having you here—a little different than just you and I bantering as we do weekly. Nice to do this for the listeners.
Brad
Have to do it again sometime. Thanks, Ronnie.
Ronnie
Maybe you’ll have me on your podcast one day.
Brad
Oh, yeah. As long as you’re willing to debate.
Ronnie
Let’s go. It was great having Brad here today. And don’t forget to hit like and subscribe to be notified when the next Barclays Brief is released. And while you’re there, don’t forget to subscribe to The Flip Side podcast that Brad hosts as well, so you get to hear a lot more from him in 2026 and beyond.
