Alex Ralph

Five years ago, private credit paid investors well for accepting illiquidity and opacity. With core bond yields at multi-year highs and private credit defaults climbing, the argument for sitting in unrated, hard-to-sell mid-market loans has all but disappeared. The pitch for private credit used to be simple. Public bonds yielded very little. Private credit paid 8% or more.

HM Revenue & Customs has told the pharma industry it will pause enforcing VAT bills for supplying free medicines under early access schemes while the government considers what to do about a revolt over the tax. The Times reported last month that Bayer, the German multinational, has stopped new patients receiving medicines under a scheme and another big pharma company was considering a similar move.

Liquidity is often treated as a constant in public markets, something investors can rely on. Recent events suggest a more complex reality. Many current concerns around credit are focused on private credit – and that conversation is worth having – but for investors in public fixed income, the more relevant question is: do you really understand the liquidity profile of what you hold? How liquidity behaves under stress Liquidity is associated with volatility.