The global economy stands at a crossroads, with borrowing patterns reshaping markets and opportunities worldwide.

Recent data reveals that global debt reached nearly $346 trillion, a figure that underscores the immense scale of financial interdependence.

This surge, driven by government borrowing in mature and emerging markets, highlights the need for strategic insights in navigating loan landscapes.

The Unprecedented Rise of Global Debt

By the third quarter of 2025, global debt had climbed to 310% of GDP, up over $26.4 trillion in just three quarters.

This increase is not uniform, with mature markets like the U.S. and Europe leading the charge.

Emerging markets also saw significant growth, adding $5.5 trillion to hit $115 trillion in debt.

Key factors behind this trend include fiscal stimulus and sector-specific borrowing booms.

• Mature markets added over $17 trillion, exceeding $230 trillion in total.
• Emerging markets experienced rises in countries such as Brazil, Russia, and Korea.
• Government debt led the surge, with China and the U.S. recording the largest increases.
• Non-financial corporate debt nears $100 trillion, accelerated by AI and clean energy sectors.
• Household debt rose $4 trillion to $64 trillion, with a debt-to-GDP ratio at its lowest since 2015.

Understanding these dynamics can help stakeholders anticipate shifts and mitigate risks.

Navigating the U.S. Leveraged Loan Market

The U.S. leveraged loan market in 2025 was marked by policy volatility and strong refinancing activity.

Loans posted mid-single-digit returns, supported by resilient growth and limited supply.

For 2026, forecasts indicate 5-6% loan returns with a starting gross yield to maturity of 7.70%.

This outlook is balanced against potential defaults, projected at 4%, including loan modification events.

Supply and demand dynamics show fluctuations, with a three-year maturity wall posing challenges.

• New supply is expected to rise from depressed levels due to lower costs and policy clarity.
• Demand remains strong, with CLOs comprising 70% of the market.
• Retail investors may shift to fixed-rate options as interest rates fall.
• Institutional inflows have averaged $449 billion over 12 months, reflecting sustained interest.

Practical strategies include monitoring economic indicators to time investments effectively.

Economic Indicators for Strategic Planning

Key metrics provide a roadmap for anticipating market movements and borrower behavior.

These indicators suggest a mixed economic outlook, with growth expected to stabilize by 2026.

Inflation remains a concern, hovering above target levels in many regions.

The Rise of Corporate and Private Credit

Private credit has emerged as a $1 trillion US direct lending market, offering alternative financing options.

Semi-liquid vehicles account for about one-third of this market, providing flexibility for investors.

New deal demand and refinancing waves are poised to overtake supply in 2026, preserving discipline in lending terms.

Growth in sectors like AI and data centers sustains debt demand, even from cash-rich firms.

• Nonbanks and private credit are increasingly competing in the middle-market space.
• Corporate loan growth is expected to pick up as interest rates decline.
• Global issuance growth is projected to slow to 5% in 2026 after a 12% increase in 2025.
• Private capital deals reached $2.3 trillion as of November 2025, the best since 2021.

This shift underscores the importance of diversifying credit portfolios in a changing landscape.

Regional Borrowing Insights: A Comparative View

Different regions exhibit unique borrowing patterns, influenced by local economic conditions and policies.

In Europe, funding costs are 120-160 basis points cheaper than in the U.S., providing a competitive edge.

Euro issuance and hedging advantages make this region attractive for borrowers seeking cost efficiency.

Emerging markets face challenges, with sovereign eurobond issuance at record highs but access limited post-debt restructurings.

• Asia-Pacific shows strong growth, driven by AI and clean-tech borrowing surges, particularly in China.
• Debt-to-GDP ratios for households remain steady at 40-45% in emerging markets.
• Tariff exposures and geopolitical issues add complexity to regional borrowing strategies.

By understanding these nuances, businesses can optimize their international financing approaches.

Sector-Specific Lending Trends

Various sectors demonstrate distinct lending behaviors, offering opportunities for targeted investment.

In banking, credit card loans have stabilized after a decline, with overall loan growth expected to pick up.

Structured finance maintains a stable outlook for 2026, supported by lower interest rates and steady growth.

Household and consumer debt growth has slowed, constrained by cost-of-living pressures and affordability issues.

• Sustainable debt issuance pace slowed significantly in 2025, reflecting shifting investor priorities.
• CRE refinancing is aided by current conditions, but high delinquencies pose risks.
• AI and cloud demand continue to support asset-backed securities in structured finance.

Focusing on sector-specific trends can help lenders and borrowers align with market demands.

Macro Drivers and Risks for 2026

The year ahead is shaped by both supportive factors and significant risks that require careful navigation.

Rate cuts of 150 basis points since 2024 provide a boost to borrower cash flow and investor yield search.

Policy easing and yield-seeking behavior are driving increased appetite for private debt instruments.

However, persistent inflation above target levels and economic slowdowns loom as potential challenges.

• Geopolitical tensions and tariffs add volatility to global markets.
• Maturity walls and $16 trillion in mature market bond redemptions present refinancing hurdles.
• Investor shifts, such as affluent reallocation to investments, influence credit demand patterns.

By staying informed on these macro drivers, stakeholders can proactively manage their loan exposures.

Embrace the complexity of global borrowing with confidence and strategic foresight.

Leverage data-driven insights to make informed decisions in a rapidly evolving financial world.

Together, we can turn challenges into opportunities for growth and stability.