Navigating credit markets in 2026: “Don’t let the macro narrative overwhelm the micro”

Brian LaRocca (0:04)

Welcome to another episode of JPMorgan's Making Sense. I'm Brian Larocca, head of our Vida Portfolio Solutions team in North America. Today, I'm joined by Ben Kinney, our head of Credit Sales.

Now, Ben, you were previously co-head of Rate Sales, and I'd argue that background has never been more relevant than it is right now in the credit markets. Welcome.

Benjamin Kinney (0:23)

Thanks, Brian. It's been a very fun transition over the course of the year to looking after our credit sales organization. It's been a timely move for me, and I think an interesting time in the market, as there are a number of different ways two markets are converging.

Brian LaRocca (0:36)

Yeah. It's a very interesting time in the market. As we sit here in early September, treasury yields are elevated, credit spreads are historically tight, and it feels like the rates market is bleeding directly into credit. A lot of credit investors grew up in a world of zero rates. What's your advice to them as they adapt to this higher for longer environment?

Yeah.

Benjamin Kinney (0:53)

I think one of the differences that we have now, as we sit here in the late 2026 versus for really the whole history of the credit market, is you have much more continuous price discovery in the credit markets. And I say that with very large asterisks. But if you think about the amount of portfolio turnover that happens on a daily, weekly, monthly basis, that leads to dynamics you didn't have historically, right? So if you look at the turnover in the investment grade bond market, and the first half of 2026, that reached an 18-year peak. And in the high-yield markets, while you're still talking about relatively small numbers, right? Less than 1% of the high-yield market turns over every day. That's the highest since 2020 If you look at, take it a step further, if you look at the number of QCIPs that trade, and this is, I think, an important stat, the percentage of QCIPs that trade or don't trade on a weekly basis has collapsed to almost zero, right? So every single week, just shy of 99%, so 98.7% of IG QCIPs will exchange hands. Not the notional amount, you'll have some price discovery on 99% of the IG universe, and that number in high yield is north of 97%.

That was 95% just last year. So you're talking about, while you don't have continuous price formation, and oftentimes these are small trades, your ability, and I think this is an important change, your ability to have a good idea as to where risk is exchanging hands looks much more like the rates market or the equity market than the credit markets. I think most of us grew up in, or most people grew up in, a lower rate environment.

Brian LaRocca (2:25)

Duration is a really interesting topic. In just the last few months, we've seen the new Fed Chair, Kevin Warsh, scrap the Fed's forward guidance and their dot plot frameworks.

And at the same time, Treasury Secretary Scott Besson is intervening directly in the Treasury markets to push yields lower, therefore changing investors' expectations of duration. We also have, obviously, the continuance of large federal deficits. How are you unpacking this macroeconomic uncertainty for clients?

Benjamin Kinney (2:54)

It is a very difficult moment, to be clear. Having grown up in the rates markets, we've certainly had times where fiscal policy and monetary policy are rowing in the same direction. There have been long periods where they've been rowing in opposite directions, where I think it's, you read the press and you hear Besson described as an activist Treasury Secretary. And I think that right now, unfortunately, we saw this last week where Warsh was a bit more transparent around how he's thinking about a number of things than maybe he was the very, you know, we're still early on in his tenure, but at the very beginning of his tenure. And I think that one thing that will help is understanding how the different policymakers are ideally working together, or if they're not, some clarity around how they're thinking about things.

One thing that does strike me is that, spend most of my career in rates, certainly, I looked after our broader macro businesses for a couple of years before moving over to Credit. This, and I don't think I'm alone in this view, but it strikes me that the clearer expression of this policy uncertainty or policy divergences, it's really an FX trade. And I think expressing the view on the dollar is a better way to trade this than trading either long-duration assets or even the front end of the rates curve, because there is so much noise in policy making right now. So like I said, it's better to express the view with FX than it is with rates.