John Zito, senior executive at Apollo Global Management, forecasts that stress in the private credit market may endure for up to 18 months, highlighting widening spreads and deteriorating underwriting standards. The warning underscores systemic risks in leveraged lending and could trigger broader repricing across high-yield debt and bank funding markets.
- Private credit stress may last up to 18 months, according to Apollo’s John Zito.
- U.S. private credit market size exceeds $1.7 trillion.
- Average spread on new private credit deals reached 7.8% over SOFR in early 2026.
- High-yield bond spreads (LQD) widened to 525 bps in March 2026.
- ^VIX rose to 28.4 in March 2026, signaling elevated market stress.
- New private credit issuance volume declined 15% year-to-date in 2026.
John Zito, a senior leader at Apollo Global Management, has issued a stark warning about the longevity of distress in the private credit sector, predicting that turbulent conditions could persist for up to 18 months. His comments come amid growing concerns over deteriorating credit quality, rising default expectations, and a sharp contraction in new lending activity across non-bank lenders. Zito emphasized that the sector is still adjusting to higher interest rates and tighter financial conditions, with many borrowers facing refinancing pressures and declining asset values. The warning is particularly significant given the scale of private credit exposure. The market has expanded to approximately $1.7 trillion in the U.S. alone, with many loans structured as floating-rate instruments tied to SOFR. As of early 2026, the average spread on new private credit deals has widened to 7.8% over SOFR, up from 5.2% in 2023, reflecting heightened risk premiums. This shift has led to a 15% decline in new issuance volume year-to-date, signaling reduced investor appetite and tighter underwriting standards. Markets are reacting to the warning with increased volatility. The CBOE Volatility Index (^VIX) surged to 28.4 in mid-March, its highest level since late 2023, while the ICE BofA US High Yield Index (LQD) spread widened to 525 basis points—up from a pre-crisis low of 280 in 2022. These moves suggest that investors are pricing in greater default risk and liquidity concerns across the broader credit spectrum. Financial institutions with exposure to leveraged loans, especially regional banks and non-bank lenders, are under growing pressure to reassess their balance sheet risks. The implications extend beyond credit markets. A prolonged private credit downturn could constrain corporate investment, especially for middle-market companies reliant on non-bank financing. It may also force a reevaluation of risk models used by fund managers and regulators, potentially leading to tighter capital requirements for alternative lenders. With macroeconomic uncertainty lingering, the trajectory of inflation, labor market strength, and Federal Reserve policy will remain key determinants of whether the pain in private credit abates sooner or deepens further.