The Roundup: Top Takeaways from Oaktree’s Quarterly Letters – June 2025 Edition

Summary

• Early April trading saw historic volatility with long-dated Treasury yields rising above 5% and S&P 500 futures down 2% before a 90-day tariff pause announcement reversed losses, resulting in the S&P 500 closing up 9.5% and the NASDAQ up 12.2%.
• The high yield bond market finished April flat after dropping nearly 3%, with liquid markets showing narrow spread ranges for most names while stressed credits trade at outsized spreads.
• Private credit issuance remains modest due to sluggish private equity deal activity, yet the sector successfully provided capital for new LBOs and refinancings despite tariff uncertainty.
• Over €11 billion of direct lending volume occurred in Europe over the last three months, driven by robust investor sentiment, stringent bank capital rules, and strong corporate fundamentals.
• European credit markets feature nearly €650 billion in outstanding senior loans and high yield bonds, with an estimated default rate of 2.5-3% supported by conservative balance sheet management.
• Stimulative government spending in Europe, including Germany releasing its debt brake to increase investment, aims to bolster military and industrial bases to avoid recession.
• U.S. consumer unemployment stands at 4.2% with nearly two million continued jobless claims, while the personal savings rate is nearly 5% and lower-income wage growth is 1.5%.
• Student loan delinquencies have accelerated with over 30% of borrowers officially delinquent, prompting a preference for financing essential purchases like HVAC systems in asset-backed finance.
• The U.S. housing market is undersupplied by an estimated 1.2 million residential units, with home prices up 1.9% year-to-date through February 2025.
• Multifamily property cash flows fell only 6.3% during the Global Financial Crisis compared to a 38% drop in S&P 500 EBITDA, highlighting real estate cash flow resiliency.
• Private capital remains uniquely positioned to offer targeted financing solutions for stressed developers where traditional liquidity has not fully recovered.