Weekly Market Recap: Week of October 6, 2025

The week in review

• Consumer confidence fell in September to 94.2
• JOLTS job openings rose to 7,227K

The week ahead

• FOMC minutes
• Consumer sentiment

Thought of the Week

Drawn to their attractive all-in yields, investors have continued to invest in riskier public and private corporate debt this year, even as high-yield spreads to Treasuries hover around their tightest levels since mid-2007. However, despite still-elevated rates keeping yields enticing, investors should consider the quality of companies backing this debt. This will be particularly relevant for below-investment grade companies if we enter a period of slower economic growth, or even a recession, as there will be an outsized impact on these borrowers. Below-investment grade companies comprise the high-yield, leveraged loans and private credit markets. One metric used to assess credit risk is issuer-weighted default rate, which measures the number of defaults by issuer – not dollar amount. As shown in this week’s chart, despite headline issuer-weighted default rates remaining low across riskier public and private credit, there may already be signs of stress building up under the surface. This is observed by looking at increased default rates including distressed exchanges, non-accruals and other out-of-court restructuring agreements that lenders and borrowers negotiate to avoid bankruptcy. Among leveraged loan and private credit users, the usage of provisions such as “amend and extend” and “payment-in-kind” have ticked up noticeably higher over the last several quarters to aid struggling borrowers. While lenders using these mechanisms for troubled credits is generally not worrisome under solid economic conditions, it could be a precursor to wider-spread trouble for already risky companies should economic conditions deteriorate.

While the resumption of rate cuts will help struggling borrowers with their debt burdens on floating rate loans, investors may want to consider diversifying their public and private credit allocations to add more core, high-quality exposure within each asset class.

Chart of the Week: Source: J.P. Morgan Credit Research, KBRA, J.P.
Morgan Asset Management.
Thought of the week: Source: J.P. Morgan Credit Research, J.P.
Morgan Asset Management.

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Originally Posted October 6, 2025 – Weekly Market Recap

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