Q2 2026: Investment Grade Private Credit update

Market statistics for the private placement market sourced from Private Placement Monitor, a standard proxy for the investment grade (IG) private credit market. Other market data supplied by Bloomberg. 

Markets

The second quarter of 2026 showed renewed momentum across the IG private placement market, with issuance rebounding after a slower March and first-half volumes tracking ahead of prior years by 60%, according to preliminary data from Private Placement Monitor. Increased macro volatility late in the first quarter, driven by escalating Middle East tensions, higher energy prices, inflation concerns and the broader interest-rate environment, contributed to a temporary slowdown in issuance. However, the market has since adjusted, with volumes recovering and demand for IG private debt remaining strong. Activity was broad-based across sectors and asset classes, with many issuers favoring shorter-duration tenors to preserve flexibility around future financing decisions.

Spreads generally remained stable to tighter during the quarter, broadly reflecting the strength of demand across both public and private IG markets. We observed that high-quality issuers and sectors with stable cash flows continued to attract significant investor interest, often resulting in oversubscribed transactions and competitive bidding dynamics. Select areas of the market, including fund finance transactions, saw some spreads widen during the quarter, reversing some of the tightening observed earlier in the year.

Secondary market activity continues to be a small subset of the overall IG private debt market but exhibited increased activity in Q2, with offerings and demand largely driven by portfolio rebalancing, liquidity needs and sellers looking to improve book yields rather than signs of broad-based credit stress. Despite continued market focus on private credit, business development company (BDC) redemptions and AI-related disruption, secondary activity remained orderly, with investors continuing to differentiate across sectors, issuers and structures.

Infrastructure debt markets remained active in the second quarter, supported by strong deal flow across transportation, energy and digital infrastructure. While we also have seen demand for shorter duration financings increase, borrowers within the infrastructure market continue to seek long-term capital solutions while investors remain focused on high-quality assets with stable cash flows, essential-service characteristics and strong underlying demand fundamentals.

Securitization and private asset-backed security (ABS) markets continued to show resilience, even as the escalation of Middle East tensions drove energy prices, as well as headline inflation, higher and affected the interest-rate outlook. Performance across diversified ABS portfolios remained broadly stable and in line with expectations, though consumer fundamentals continue to diverge.

Outlook

In an increasingly competitive private credit market, a focus on risk profiles, disciplined underwriting and strong structural protections are of increased importance, in our view. While tighter spreads and oversubscription dynamics require selectivity in investing, ongoing volatility and borrower demand for flexible private capital continue to create opportunities across both primary and secondary markets.

 

In focus

Rethinking approaches to digital infrastructure

The volume and pace of digital infrastructure financings have shown little abatement in recent years. IG digital infrastructure has grown to cover a breadth of critical use assets outside of those widely associated with the word “digital.” Previously, the digital infrastructure sector has often been viewed as consisting of three pillars: data centers, fiber infrastructure and cell towers. Fundraising for projects in these categories has been a staple of capital markets for several years.

However, the rapid growth of infrastructure being developed to support AI-related demand requires a deeper understanding of how these traditional digital assets must also intersect with power generation and transmission projects, semiconductor manufacturing facilities and even subsea cable deployment. IG financings for digital infrastructure assets have permeated into most major types of financing markets, including project finance, asset-backed securitizations, collateralized mortgage markets and others. Investors in IG private credit will likely encounter a breadth of digital infrastructure opportunities, with over US$200 billion in IG bond issuances by technology firms recorded in 2025 (source: MUFG: The AI Industrial Revolution Volume 1 Report, 2026). A deeper understanding of the key developments, risks and outlooks for these diverse assets is necessary to navigate this expanding investment universe.

What IG investors should look for

Certain characteristics tend to make opportunities viable: contracts with highly rated counterparties, multi-year (or even multi-decade) underlying contracts, strong diversification of cash flow streams in the absence of a single-party offtaker, strong supply–demand fundamentals and experienced sponsorship and operating teams. These characteristics can be applied to data centers, fiber-optic networks, cell towers, power generation and transmission infrastructure, computing equipment and other projects that all play a part in the broader digital ecosystem of the future. Investors are increasingly looking to educate themselves on business models that are new to the IG space, such as neocloud providers offering graphics processing units as a service (GPUaaS), edge-computing such as micro-data centers, cyber-physical transport and logistics, including smart transport hubs and ports.

Data centers tend to get most of the press coverage within the digital landscape, given that US$3 trillion is estimated to be spent globally on their development between 2026–2030. Of this, data center tenants will spend an estimated US$1 trillion–$2 trillion on IT equipment to outfit such facilities, leading to investment opportunities commonly done in tandem with facility construction. Previously, IG considerations for data centers had depended largely on the credit rating of their tenants and the proximity of a certain facility to population centers. Recently, the location has had less to do with whether the market views a project as IG, but rather the focus has been increasingly on whether the facility has secured ample power, either through a mix of existing grid connections or onsite generation. Non-IG transactions in the sector can lack satisfactory power supply arrangements in place. The criteria have accordingly developed to embody the nuances of a rapidly evolving sector, which is also informed by feedback from capital markets. In addition, the increasing prevalence of behind-the-meter solutions to power facilities that cannot be supported by existing grid infrastructure has given rise to a new corner of opportunities covering natural gas plants, solar and battery storage, as they become a more significant part of the digital infrastructure sector.

Fiber-optic network financings have followed a similar pattern. Metrics like proximity to densely populated areas, open access availability to multiple operators and the high costs of replicating the network providing a competitive moat were the key determinants in applying an IG label to a transaction or issuer. Recently, however, the importance of being a first mover in developing a network infrastructure that can bridge the gap between regional AI inference hubs, driven by data centers’ reliance on access to these networks, has enticed investors to look at a project’s creditworthiness from a different perspective. Major deployments supported by funding through the Broadband Equity, Access and Deployment Program (BEAD) in the U.S. can help infrastructure in more rural areas get off the ground. However, we believe in considering possible investments in fiber build with caution, as some builds might be overly speculative in uptake projections based solely on location. This has been the case in many non-IG opportunities we have seen.

Cell tower network markets have had less of a transformation, as many key incumbents continue to operate networks with thousands of towers contracted to operators under long-tenured master service agreements. We anticipate a continued trend of legacy telecom operators spinning out their cell tower portfolios to provide further opportunities to institutional investors.

Key risks in digital infrastructure

Projected power consumption by data centers, which in the United States could be up to five times as much as their current requirements and require up to $1 trillion in spending by 2030, has led to an inflection point in the development of digital infrastructure. In the current climate, the need to address the physical limitations of current power availability and cooling systems has given rise to increasing capital outlay needs. As major data center projects now look to raise capital in the tens of billions, we have seen the scope of certain projects involve developing grid infrastructure capable of powering a small city. This is largely due to an increasing number of funds that have been raised with mandates to invest in both data centers and supporting power infrastructure.

Such opportunities bring greater interface risk but also increased risk of public opposition. Up to US$42 billion of planned data centers have been cancelled in 2026 alone due to local pushback. However, other factors continue to push the development of these projects ahead. These include the increasing competition between large geopolitical players to capture and retain an advantage in AI compute, plus regulatory mandates that require domestic data processing capabilities.

Accordingly, several aspects beyond the structural features of a financial transaction play a part in what risks investors need to consider. When it comes to digital infrastructure, a comprehensive understanding of what the political and regulatory climate could be is just as critical as an understanding of a particular transaction’s quantifiable metrics. For example, recent YouGov polling reports that 65% of surveyed Americans think AI will reduce the number of jobs available in the United States, and up to 45% of Americans say they are very or somewhat concerned that AI might cause human extinction.

The increasing prevalence of not-in-my-backyard sentiment (a.k.a., “NIMBYism”) and regulatory policy shifts due to political pressures have the potential to derail financing markets that are still very much operating at a record pace. Investors would be wise to consider how public sentiment and future regulations could shape tomorrow’s investment climate. Whether it is public or private, the IG market and the financing it brings are factors critical to the aspirations of developers and bringing future digital infrastructure to life. And investment in this array of new opportunities requires partnership with asset managers that are well-versed in the complexities, potential challenges and growth dynamics of these spaces.

Sources: Private Placement Monitor, Bloomberg, The Economist, JLL Global Data Center Report, Infrastructure Investor Digital Report (June), MUFG Capital Markets Strategy: The AI Industrial Revolution (Volume 1), McKinsey: Global Private Markets Report, YouGov, 2026.

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