Finance News · Wednesday, 26 August 2026

01 · Briefing · what happened

Three firms measured the same defaults. They got 2.51%, 6%, and "somewhere between"

Finance News 1 min 30 sources

Private credit now lends where banks will not, and nobody agrees how much of it is going bad. The gap is not a data problem. It is a definitional one, and the smallest number is the one that gets quoted.

2.51%

the narrow default rate

Proskauer, across 716 loans worth $195.6bn [1]

6.0%

the broad default rate

Fitch, same market, wider definition - a record [1]

65%

defaults that were renegotiations

not missed payments, on Moody's 2025 estimate [1]

$4.5tn

European debt maturing by 2029

37% of the world's refinancing needs [2]

At a glance

Proskauer's index put the private credit default rate at 2.51% for the second quarter, measured across 716 loans worth $195.6bn. [1]
Fitch, using a broader definition of default, put the US rate at a record 6.0% in April. [1]
Moody's put 2025 somewhere between 1.6% and 4.7%, which is less a number than an admission. [1]
The reason they disagree is not bad data. It is that they are not counting the same thing. [1]
Moody's estimates that about 65% of private credit defaults in 2025 were distressed restructurings - debt swapped or the deadline pushed back under pressure - rather than a payment actually being missed. [1]
The narrow measures largely do not count those. So the more freely a lender can rewrite the terms, the healthier its book looks. [1]
Private credit is money lent directly by funds rather than by banks, never reaching public markets, and usually held to maturity instead of traded - which means there is no daily price on it either. [1]
The borrowers are mid-sized companies, roughly $25m to $250m of annual operating profit, concentrated in business services, healthcare, software and industrials. [1]
The industry exists because of a rule change: after 2008, Basel III made this kind of lending expensive for banks, and funds moved into the space the banks left. [1]
Europe is next. About $4.5tn of European corporate debt matures between 2025 and 2029 - 37% of global refinancing demand - and banks are not coming back for it. [2]
European private lending raised 56bn euros in the first nine months of 2025 alone and is expected to reach a cumulative 1tn euros by 2030. [2]
A Chinese consumer lender reporting the same week described a sharp industry downturn, tighter funding and rising credit risk - the same forces, on a market that does publish quarterly. [6]
The money keeps arriving: a new fund partnership opened this week to push private credit into Southeast Asia, and a single US deal financed a fire-protection acquisition the same day. [3][4]
Listed private-market benchmarks are among the few indices in negative territory this year, which is the closest thing to a public price on any of this. [5]

Forces in play

Money arriving High↑

European private lending raised 56bn euros in nine months and is heading for 1tn by 2030 [2]

What counts as trouble High→

three measures of the same market, from 2.51% to 6.0%, and the difference is the definition [1]

Bank retreat Steady→

a capital rule written in 2010 still decides who gets to make these loans [1][2]

Regulator attention Building↑

supervisors spent this spring writing about an asset class that barely existed at scale 15 years ago [1]

In play Private credit funds — lend directly, hold to maturity, and can rewrite the terms Proskauer, Fitch, Moody's — three scorekeepers, three definitions, one market Mid-sized borrowers — too big for a small-business loan, too small for the bond market Basel III — the 2010 rule that made this lending expensive for banks and cheap for funds

How it unfolded

2008-10 the crisis, then Basel III makes leveraged lending expensive for banks [1]
The 2010s funds move into the gap; the loans are never traded, so they are never priced daily [1]
2025 about 65% of defaults are renegotiations rather than missed payments [1]
April 2026 Fitch's broader measure hits a record 6.0% [1]
This spring regulators start writing about the asset class [1]

Where this points

The number to watch is not the default rate but the gap between the two default rates: if renegotiations keep rising while the headline stays near 2.5%, the measure has stopped describing the market rather than the market having stayed healthy.

Also today

9 more stories on this beat.

Inflation stayed put, and a hike is now in play

US PCE inflation rose 0.2% in July against a 0.1% forecast, leaving the annual rate at 3.7% and core at 3.3% - both well above the Fed's 2% target. The next consumer-price report lands on 11 September, days before the decision. [7][8]

Why it matters — June's fall was mostly cheap petrol, and oil has since risen about $15 a barrel. The relief that flattered the last print will not be there for the next one. [7]
The Treasury is leaning on its own bond market

Yields eased after the Treasury Secretary's intervention last week, having hit their highest since 2007. Total US public debt has passed $40tn, up by a third in under five years, and the 30-year briefly topped 5.31%. [10][11][12]

Why it matters — Blunting the bond market's inflation signal makes the borrowing cheaper and the warning quieter at the same time. Those are the same act. [10]
Yields barely moved on the day

The 10-year sat at 4.647% and the 30-year was little changed, after a broad fall on Tuesday when the 10-year lost almost eight basis points. [13][14][15] The dollar held a narrow range before the print and firmed slightly after it, and Japanese government bonds rose in step with Treasuries. [27][28][29]

Why it matters — A market waiting for two things at once - the inflation print and Friday's speech - mostly does nothing.
Oil fell on hopes of an Iran deal

Brent dropped more than 2.5% to near $86 a barrel, extending a multi-session slide on reports the US and Iran are closing on an interim ceasefire that includes shipping guarantees. World stocks edged up on the same news. [15][16]

Why it matters — Every inflation forecast in the paragraphs above is really a forecast about this one price.
China's CNOOC banked the war premium

The offshore oil producer posted a record first-half net profit of 85.8bn yuan ($12.9bn), up 23.4%, on higher prices driven by the Iran conflict and rising output. [17]

Why it matters — The same conflict that is keeping Western central banks hawkish is showing up as a record profit on a Hong Kong filing.
Jackson Hole, and a speech everyone is reading in advance

Central bankers gather in Wyoming from Thursday, with Fed Chair Kevin Warsh due to speak on Friday after long-term borrowing costs hit a near two-decade high. Citadel Securities' macro strategist argues long-term yields are heading lower and that the crowd betting against bonds could be forced to buy them back - the same strategist who wrongly called a Fed hike last month, after which the Dow fell 1,150 points. [18][19][20][21][22]

Why it matters — A crowded trade moves hardest in the direction nobody is positioned for, and markets are reading what Warsh does not say as carefully as what he does.
Europe's hawk says it is not over

ECB board member Isabel Schnabel said further tightening will be necessary, because at the current rate inflation is unlikely to return to target over the medium term, with the Middle East conflict and a strong euro-zone economy both pushing up. [23]

Why it matters — Two of the world's three big central banks are now arguing about how much more to raise, not whether to stop.
Switzerland wants UBS to hold more

The Swiss National Bank repeated its backing for tougher capital rules, its vice-chairman saying the concentration created by UBS's 2023 takeover of Credit Suisse makes stronger rules urgent. [24]

Why it matters — One bank now carries the country. That is the argument, and it is the same argument that pushed lending into private funds in the first place.
A flat index over a rough day underneath

The S&P 500 finished near flat and the Dow lost 112 points, while Intuit gapped down 9.5% at the open after guiding fiscal 2027 revenue below expectations - it is now down 45% for the year - and Kraft Heinz fell 3.46%. [9][25][26][30]

Why it matters — An index that does not move is not the same as a market that did not move. Averages hide exactly the days that matter to anyone holding one name.

02 · Lesson · why it matters

Who counts decides what counts

When the party being measured also writes the definition, the number stops describing the world and starts describing their preference.

How it works

A number is meant to measure something in the world
But somebody has to decide what counts
Usually the party being measured, or one paid by them
Every borderline case gets ruled the flattering way
The number stays low without the thing improving
And the low number is the one that gets quoted

The twist

When the same reality gets three different numbers, the disagreement is not about arithmetic - it is about who was allowed to write the definition, and that is usually the person the number is about.

Where you've seen this

Unemployment

stop looking for work for four weeks and you leave the count, so the figure can fall while fewer people have jobs

Hospital waiting lists

a clock that restarts when a patient is referred onward can shorten every wait without treating anyone sooner

On-time flights

on time means leaving the gate, so an airline can pad the schedule and improve its record without flying faster

School results

when a pass rate is what gets judged, borderline pupils get the attention and everyone else's teaching quietly funds it

The catch

None of this means the low number is a lie. Renegotiating a loan really is different from not being paid, and often ends better. The trap is treating a measure of one thing as a measure of the other.

And the whole of it

Everyone in this chain is behaving reasonably. The fund does not want to force a good company under; the index provider needs a definition it can apply consistently; the investor wants a comparable figure. Nobody set out to make risk invisible, and it became invisible anyway. Most numbers you will read this week were assembled the same way, by people each doing something defensible.

03 · Lab · your turn

You Write the Definition

Set the rules for what counts as a loan default and watch the rate you would publish swing by a factor of nine, while the loan book never changes.

04 · Truth · what's really going on

Stripped of the framing

A market that lends where banks are not allowed to has ended up grading its own homework - and the grade that gets quoted is the one that counts fewest things as failure.

Why it lands — A precise-looking number ends an argument. '2.51%' reads as a measurement, and almost nobody asks what was measured; a range of 1.6% to 4.7% would have invited the question, which is exactly why the precise one travels.

Claimed

What people said. Not yet a fact.

Proskauer's index

The private credit default rate was 2.51% in the second quarter, across 716 loans worth $195.6bn. [1]

Covers senior secured and unitranche loans - the safest part of the market by construction, which is a choice about scope, not a finding about health.
Fitch

The US private credit default rate hit a record 6.0% in April. [1]

Same market, broader definition. Both numbers can be correct at once, which is the problem.
The industry's own framing

Private credit is a stabilising, income-producing complement to bank lending. [2]

That framing appears in material published by firms selling access to it - true or not, it is not a disinterested source.

Verified

What we could actually stand behind.

Roughly 65% of 2025's private credit defaults were distressed restructurings rather than missed payments. [1]

How we checked — Moody's own estimate, reported alongside the competing rates - so the definitional gap is documented by the agencies themselves, not inferred by us.
The industry grew into space vacated by banks after Basel III made leveraged lending expensive for them. [1][2]

How we checked — Stated independently in two separate pieces, one of them an industry-side account that has no reason to volunteer it.
About $4.5tn of European corporate debt matures between 2025 and 2029, 37% of global refinancing demand. [2]

How we checked — A single source, and it is an industry-published figure - treat the precision with more caution than the direction.

Nobody knows

Open questions — ours included.

What the real default rate is.

Nobody can say, because there is no agreed definition of default here and no daily market price to check any of it against. The honest answer is a range, and the range is wide. [1]
How much has been renegotiated rather than repaid this year.

The 65% figure is for 2025. There is no 2026 equivalent yet, which is the number that would actually tell you whether this is getting worse. [1]
Whether the European build-out is being lent as carefully as the US one was.

The money raised is public; the terms are not. These loans never reach a public market, so there is no outside price on any of them. [1][2]
What regulators intend to do.

They have started writing about it. Nothing in the day's reporting says any rule is drafted. [1]

Who gains

The lending funds — A definition that counts a renegotiation as a live loan rather than a default keeps reported performance high, and reported performance is what raises the next fund. [1]
Borrowers who would otherwise fail — A lender who can rewrite the deadline rather than call in the loan keeps mid-sized companies trading through a bad year - which is a real benefit and not a trick. [1]
Banks — The riskiest lending left their balance sheets by regulation, and the capital rules they lobbied over now sit on somebody else's book. [1][2]

Who pays

Pension funds and insurers — They are the money behind these funds, and they are pricing an asset whose failure rate is reported three different ways. [2]
Anyone reading the low number — An investor comparing 2.51% against a public-market default rate is comparing two things that are not measured the same way, and nothing on the page says so. [1]

05 · Hope · carry this

It was three credit agencies, not a regulator or a whistleblower, who put the gap between those numbers in public. A market arguing openly about how to measure itself is further along than one where everybody quotes the same comfortable figure.