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Credit Markets Update Q3 2026

Read more about M&A activity and trends in this sector

Credit Markets Update Q3 2026

Credit Markets Update Q3 2026

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Credit Markets Commentary

Credit markets remained constructive in Q3 2026, with M&A financing activity accelerating late in the quarter while lender selectivity continued to favor higher-quality borrowers

Late-Quarter M&A Momentum Builds as Capital Continues to Favor Higher-Quality Borrowers

  • Q3 new-issue leveraged-loan volume totaled $164.2 billion, the lowest quarterly level of 2026, as lower refinancing activity offset stronger recapitalization volume and a late-quarter improvement in M&A financing 
  • September M&A-related issuance reached its highest monthly level since early 2022, led by large-cap transactions and stronger sponsor activity 
  • Supportive technical, including stronger CLO formation and fund flows, continued to favor higher-quality borrowers and improve execution conditions
  • High-yield issuance totaled $81.2 billion in Q3, while weaker credits continued to face wider spreads and greater refinancing pressure

Tailwinds…

  • Strong investor demand and CLO formation continue to provide a supportive liquidity backdrop for new issuance and refinancing activity 
  • Improving sponsor confidence and a recovering M&A pipeline could support further growth in new-money financing volumes
  • Continued investment in AI infrastructure and related power capacity is expected to remain a meaningful source of financing demand

…Risks on the horizon

  • Elevated rates and higher debt service costs continue to pressure highly leveraged and lower-rated borrowers
  • Lenders remain cautious toward software related transactions, limiting financing activity despite improving market conditions elsewhere
  • A growing wall of 2028 maturities could heighten refinancing challenges for weaker issuers requiring capital market access

Source:
PitchBook | Leveraged Commentary & Data, KPMG Market Research.

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Credit Markets Update Q3 2026

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Managing Director, KPMG Corporate Finance LLC
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Rebecca Brokmeier
Principal, Advisory, KPMG Corporate Finance LLC
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