Credit markets have become more stable and behave differently – KKR’s Eddie O’Neill

“Look at credit markets, they behaved quite differently this time,” said Eddie O’Neill, co-head of global liquid credit at KKR, about the period of volatility that whipped global financial markets in April. “They were very stable.”

When equity markets were volatile, credit markets did see some selling off but in a very orderly repricing of risk. There was “no blood in the streets, no sustained buying opportunities,” O’Neill told host Lisa Lee at the Creditflux CLO Symposium 2025 in London.

That there were three reasons: 1) the nature of the shock, which is policy driven, would take time to play out and the end result of it is still fairly unknown; 2)

credit markets have matured in the last five years with new pools of capital becoming more significant; 3) the markets have been starved of assets and been technically driven through 2024 and 2025 with money on the sidelines waiting to step in.

The European credit markets are more stable than the US, contended O’Neill. There is no significant ETF buyer base in Europe, the fundamental health of European corporates is pretty good, and Europeans have had the political realization that they need to turn things around. It's not without risk as maintaining political cohesion in Europe is difficult. Europe still has an Achilles' heel---energy costs and demographic will be a challenge.

KKR is generally more bullish on Asia, said O’Neill. Despite the tensions between the US and China and slowdowns in the Chinese property market, Asia has the potential to continue to be a big driver of global growth. Asian credit will become a very big market over the next number of years, and investors should be looking at the region, he said. In particular, the investment grade credit market in Asia currently delivers significantly greater returns with lower defaults and loss rates compared to the US investment grade market.