Core Viewpoint - The ongoing conflict between the US, Israel, and Iran is evolving into a prolonged war, contrary to initial expectations of a quick resolution, leading to increased market volatility and economic scars [2][4]. Group 1: War Dynamics - The initial market reaction to the conflict was a modest decline of 3%-4%, driven by hopes for a swift resolution, but the situation has become more complex [4]. - The interests of the US, Israel, and Iran are misaligned, making a ceasefire unlikely in the short term [5]. - The US aims for a quick victory to avoid inflation impacts and midterm election repercussions, while Israel seeks to leverage US support to eliminate Iranian threats [6]. Group 2: Economic Implications - The conflict could lead to a significant increase in global inflation, with the potential for oil prices to rise dramatically, impacting the US economy [8][11]. - The volume of oil passing through the Strait of Hormuz has plummeted by 97%, with estimated losses reaching 17.6 million barrels per day, exacerbating supply issues [11]. - Historical data suggests that large-scale oil supply shocks typically result in a 42% average decline in production four years later due to infrastructure damage [11]. Group 3: Financial Market Risks - The conflict is amplifying existing financial risks, particularly in the private credit market, which is facing significant redemption pressures [15][16]. - Major asset management firms are experiencing record redemption requests, indicating a potential liquidity crisis reminiscent of the 2008 financial crisis [15][16]. - The interconnectedness of macroeconomic cycles, geopolitical tensions, and financial leverage could lead to severe market volatility and systemic risks [17].

1. Report Industry Investment Rating No information provided regarding the report industry investment rating. 2. Core Viewpoints of the Report - The main trading theme in the market this week is the US - Iran conflict. The closure of the Strait of Hormuz has led to a continuous interruption of global oil supply, soaring oil prices, a downward revision of Q4 GDP, and high - inflation in line with expectations, which further reduces the Fed's annual interest - rate cut expectations, strengthens the US dollar, and puts pressure on stocks and bonds [2][13]. - The US private credit market has experienced a "redemption wave + redemption cap setting" event, which has lowered market expectations for private credit yields and credit quality and increased concerns about market liquidity. The private credit market has grown rapidly, and the pressure of risks is rising [3][14]. - There are signs of a policy shift at the regulatory level. The Fed is revising the "Basel III Endgame," but whether the regulatory rule shift can effectively urge the convergence of private credit risks remains doubtful, and the existing risks cannot be underestimated [4][15][16]. 3. Summary According to the Directory 3.1 US Treasury Yield Review this Week - **Yield Changes**: During the week from March 6 to March 13, 2026, the yield of 1 - month US Treasury remained unchanged at 3.75%, while the yields of 1 - year, 2 - year, 5 - year, 10 - year, and 30 - year US Treasuries increased by 11bp, 17bp, 15bp, 13bp, and 13bp respectively, reaching 3.66%, 3.73%, 3.87%, 4.28%, and 4.90% [13]. - **Private Credit Market Events**: Morgan Stanley and Cliffwater LLC restricted redemptions of their private credit funds. Market expectations for private credit yields and quality have been lowered, especially for the software industry. The "redemption wave + redemption cap setting" event has increased concerns about market liquidity. As of February 11, 2026, Fed commercial bank loans to non - deposit financial institutions (NDFI) reached $1.9 trillion, a 35% increase from the beginning of 2025 [3][14]. - **Regulatory Policy Shift**: Fed Vice - Chair Michelle Bowman proposed to give banks more business flexibility to reduce the market share of non - bank financial institutions. The Fed is revising the "Basel III Endgame," which may reverse the original direction of regulatory reform [4][15]. - **US Treasury Auctions**: The 3 - year US Treasury auction on March 10 had a scale of $58 billion, a winning rate of 3.579%, a bid - to - cover ratio of 2.55 times, and a tail spread of 1.275. The 10 - year US Treasury auction on March 11 had a scale of $39 billion, a winning rate of 4.217%, a bid - to - cover ratio of 2.45 times, and a tail spread of 0.825. The 30 - year US Treasury auction on March 12 had a scale of $22 billion, a winning rate of 4.871%, a bid - to - cover ratio of 2.45 times, and a tail spread of - 0.650 [25][26]. 3.2 US Macroeconomic Indicator Review - **Inflation**: In January 2026, the monthly core PCE price index increased by 0.4% month - on - month, in line with expectations, and the annual core PCE was 3.1%, the highest since March 2024. In February, the seasonally - adjusted core CPI increased by 0.2% month - on - month, and the core CPI annual rate was 2.5%. The unadjusted CPI annual rate was 2.4% [33][34]. - **Employment**: As of the week ending March 7, 2026, the number of initial jobless claims was 213,000, lower than expected. As of the week ending February 28, the number of continued jobless claims decreased to 1.85 million. In January, the JOLTS job openings reached 6.946 million, the highest since October 2024 [35]. - **Business Index**: In February 2026, the annualized total number of existing home sales was 4.09 million, higher than expected, with a 1.7% month - on - month increase. The US Q4 2025 real GDP annualized quarterly - on - quarterly revised value was 0.7%, far lower than expected and the previous value [37]. 3.3 Major Asset Review - **Bonds**: German and Japanese bond yields increased across the board. German bond yields rose due to euro - zone inflation resilience and delayed expectations of ECB interest - rate cuts. Japanese bond yields rose as the market priced in the normalization of the Bank of Japan's policy and inflation recovery [39]. - **Equities**: Global stock markets generally declined, except for the Russian MOEX, which rose slightly by 0.62%. The A - share Shanghai Composite Index, the Indian Sensex30, and the Japanese Nikkei 225 were among the top decliners [39][40]. - **Commodities**: Energy, coal, and cryptocurrencies rose, while precious metals and some agricultural products fell slightly. Brent crude oil, coking coal, and Bitcoin were among the top gainers, while London gold, CBOT wheat, and LME copper were among the top decliners [40][41][42]. - **Foreign Exchange**: Major currencies generally weakened, with the Russian ruble, Japanese yen, and Indian rupee having the largest declines [43]. 3.4 Market Tracking - **Bond Yields**: The report presents the changes in the bond yields of major global economies, including China, the US, Japan, the UK, Germany, France, India, Vietnam, and South Korea [45]. - **Stock Indices**: It shows the changes in major global stock indices, such as the A - share Shanghai Composite Index, the Hong Kong Hang Seng Index, the US Nasdaq, the Japanese Nikkei 225, the Russian MOEX, etc. [47]. - **Commodities**: The report shows the changes in major commodities, including London gold, Brent crude oil, LME copper, CBOT wheat, etc. [50]. - **Foreign Exchange**: It presents the changes in major global foreign exchange rates against the RMB, such as the Hong Kong dollar, US dollar, Japanese yen, Russian ruble, etc. [52]. - **Economic Data Panels**: The report provides economic data panels for the US, Japan, and the euro - zone, including GDP, inflation, employment, and business indices [55][60][65].

Core Viewpoint - The U.S. private credit market is undergoing a severe liquidity crisis, with significant impacts on traditional banking systems as risks spread from shadow banking [3][5][6]. Group 1: Crisis Overview - The crisis is characterized by a rapid deterioration of underlying asset valuations, leading to a surge in redemption requests from investors [5][6]. - Blue Owl sold loans at a discount to meet redemption demands, marking a critical moment in the private credit sector [5][11]. - BlackRock's drastic write-down of a loan to zero exacerbated market fears, prompting other institutions to limit redemptions [13][14]. Group 2: Market Dynamics - The private credit industry's exposure to software and technology companies is significant, with some portfolios having up to 55% in such assets [9]. - As AI advancements raised concerns about the long-term viability of these companies, stock and bond prices plummeted, triggering investor panic [9][11]. - The liquidity crisis has led to a vicious cycle of asset sales and redemption restrictions, severely impacting investor confidence [6][14]. Group 3: Banking Sector Impact - Deutsche Bank reported a private credit exposure of approximately $30 billion, raising alarms about potential defaults as the crisis unfolds [17]. - The U.S. banking sector has commitments of up to $2.8 trillion in undrawn loans to non-deposit financial institutions, heightening concerns about systemic risks [7][17]. - The potential total exposure for banks could reach $4.2 trillion if private credit institutions face liquidity issues and draw on these commitments [17]. Group 4: Future Outlook - Market participants are closely monitoring upcoming disclosures of fund flows, with Barclays warning that negative outflows could further widen spreads and exacerbate market anxiety [19]. - The ongoing turmoil in the $2 trillion private credit market is testing the resilience of the firewall between private credit and traditional banking [19].

Core Viewpoint - The U.S. private credit industry is facing dual pressures of liquidity contraction and asset revaluation, with a market size of $1.8 trillion at risk due to investor withdrawals and reduced credit from major financial institutions [1] Group 1: Redemption Trends - Cliffwater has restricted redemptions for its $33 billion flagship fund (CCLFX) in Q1, approving only about half of the redemption requests, which accounted for 14% of total shares [3] - Morgan Stanley's North Haven Private Income Fund, with $7.6 billion, also limited withdrawals after experiencing a 10.9% redemption request, fulfilling only 45.8% of those requests [3] - The trend of redemption restrictions is spreading across the industry, with HPS setting a 5% redemption cap for high-net-worth clients and Blackstone's Bcred fund fully redeeming after a 7.9% request [3] Group 2: Valuation and Arbitrage Risks - The core driver of investor withdrawals is the net asset value (NAV) arbitrage, as private credit institutions have not adjusted their portfolio valuations in line with significant declines in public market asset values [6][7] - This lag in pricing creates an arbitrage opportunity where investors seek to redeem at inflated book values, leading to a bank-run-like dynamic that exacerbates liquidity pressures [8] Group 3: External Financing and Market Conditions - JPMorgan has proactively reduced the valuations of certain software loans in private credit portfolios, indicating a tightening of external leverage sources for private credit institutions [9] - The rapid expansion of the private credit industry, heavily reliant on regulated banks for leverage financing, is now under scrutiny as the market environment shifts and underlying asset valuations decline [10]

Group 1 - Blue Owl Capital's stock price fell over 5.6% to $9.85 following reports of exposure to a bankrupt UK real estate lending institution, Century Capital Partners [1] - Century Capital Partners entered bankruptcy management in February, with Blue Owl Capital reportedly providing funding for the riskiest layer of financing [1] - NatWest Group, a senior creditor of Century Capital, also experienced a decline of 2.22%, trading at $15.45 [1] Group 2 - Blue Owl Capital has rapidly expanded in the private credit sector but is currently facing increased pressure [2] - The company recently restricted redemptions on a $1.6 billion private credit fund and sold approximately $1.4 billion in loan assets to pension funds and its own insurance company, raising concerns about asset quality and liquidity [2]

Core Viewpoint - Blue Owl Capital's stock price has declined over 5.6% to $9.85 following reports of exposure to a bankrupt UK real estate lending institution, Century Capital Partners [1] Group 1: Company Exposure and Market Reaction - Blue Owl Capital provided funding for the riskiest layer of financing to Century Capital Partners, which entered bankruptcy management in February [1] - The news led to a decline in NatWest Group's stock by 2.22%, closing at $15.45, as it is also a senior creditor of Century Capital [1] - RSM UK Restructuring Advisory, managing Century Capital's bankruptcy, expects to recover approximately £95 million in debts, alleviating some market concerns about potential losses [1] Group 2: Recent Challenges Faced by Blue Owl Capital - Blue Owl Capital has rapidly expanded in the private credit sector but is currently facing increased pressure [2] - The company restricted redemptions on a $1.6 billion private credit fund and sold approximately $1.4 billion in loan assets to pension funds and its own insurance company, raising concerns about asset quality and liquidity [2]

Core Viewpoint - The private credit industry, currently valued at $1.8 trillion, is facing pressures from increased retail fund redemptions and elevated borrower risks due to AI impacts [2] Group 1: Fund Performance - Goldman Sachs disclosed that its private credit fund's corporate software exposure is approximately 15.5%, which is lower than its peers [2] - The redemption rate for Goldman Sachs' fund in Q4 is 3.5%, below the industry average, with a 7% decline in quarterly fund inflows, which is a milder drop compared to competitors [2] Group 2: Asset Structure - Goldman Sachs' alternative credit assets in its asset management division amount to $188 billion, primarily composed of institutional funds and independent managed accounts, with 17% coming from the U.S. Business Development Company (BDC) sector [2] - The company emphasizes diversified funding sources to flexibly deploy capital throughout economic cycles, avoiding excessive reliance on retail channels to mitigate expansion and liquidity risks [2] Group 3: Risk Management - Goldman Sachs maintains strict underwriting standards and has not compromised risk control for asset expansion, acknowledging the disruptive risks posed by artificial intelligence [2] - The firm focuses on high-quality companies with critical mission workflows and proprietary data advantages, differing from some industry peers that rely heavily on annual recurring revenue and physical interest payment arrangements to reduce credit risk [2] Group 4: Market Context - There is a rising demand for redemptions from non-listed Business Development Companies, leading to outflow pressures for several industry peers [2] - Goldman Sachs' disclosure of core metrics and risk management logic aims to alleviate industry panic and highlight its asset quality and funding structure advantages [2]

Core Viewpoint - Goldman Sachs' private credit fund has reduced its asset value by 0.9% in the fourth quarter due to lower expected returns from business development companies [1][2]. Group 1 - The net asset value per share of Goldman Sachs BDC has been adjusted from $12.75 to $12.64 [1][2].

Group 1: Overview of Private Credit - Private credit refers to loans negotiated directly between borrowers and a limited number of non-bank lenders, with a market size nearing $1.3 trillion in the U.S. as of 2023, accounting for about 10% of total commercial bank credit [2][6][9] - The primary borrowers in the private credit market are small and medium-sized enterprises (SMEs), with investments coming from non-bank institutional investors like pension funds and insurance companies through private credit funds and Business Development Companies (BDCs) [8][9][11] - The private credit market has seen significant growth, particularly in direct lending, which constitutes about one-third of the investment strategies employed [15][19] Group 2: Current Situation of Borrowers - Cash flows for medium-sized enterprises are recovering post-interest rate cuts, with a notable improvement in operational income and a decrease in the proportion of companies with negative free cash flow [20][22] - However, BDC shareholder returns are declining due to three main factors: falling asset yields faster than liability costs, narrowing credit spreads, and the extension of risk exposure [22][23][27] - The average non-accrual investment ratio for listed BDCs has risen from 0.8% to over 1.2% since the interest rate hikes began, indicating increasing risk in the private credit market [28][30] Group 3: Rising "Invisible Defaults" - Credit rating agencies report an upward trend in default rates within private credit, with "invisible defaults" also on the rise, suggesting that many loans are underreported in terms of risk [35][50] - The software and healthcare sectors are highlighted as particularly risky, with high leverage in the software industry and potential disruptions from AI technology [41][42] - The reliance of private credit liquidity on banks has increased, with significant commitments from major banks, although the risk contagion remains manageable among large banks [44][46]

Market Overview - The U.S. stock market experienced a decline, with all three major indices falling. The Dow Jones dropped by 267.50 points (0.54%) to close at 49,395.16, the Nasdaq fell by 70.91 points (0.31%) to 22,682.73, and the S&P 500 decreased by 19.42 points (0.28%) to 6,861.89. The S&P 500 index nearly erased all its gains for the year, while the Nasdaq has seen a year-to-date decline of 2.41% [1]. Financial Sector - Investors withdrew from the financial sector due to concerns over risks associated with private credit. Blue Owl Capital announced the sale of $1.4 billion in loan assets and tightened liquidity arrangements for investors, leading to a sell-off in private credit stocks. Blue Owl Capital's stock fell by 5.93%, Blackstone dropped by 5.37%, and Apollo Global Management decreased by 5.21% [5]. - The tightening of liquidity arrangements means that investors can no longer redeem funds as frequently, raising concerns about liquidity risks in private credit funds [5]. Technology Sector - Major technology stocks showed weak performance, with Apple down 1.43%, Netflix down 1.27%, Microsoft down 0.29%, Alphabet down 0.16%, and Nvidia down 0.04%. In contrast, Meta rose by 0.24% and Tesla increased by 0.12% [1]. - The software sector also faced pressure, with Salesforce down 1.30%, Intuit down 2.06%, and Cadence Design Systems down 2.76%. Concerns about artificial intelligence potentially disrupting the industry have contributed to this downturn [6]. Oil Market - Oil prices continued to rise, with WTI crude oil futures increasing by 1.90% to $66.43 per barrel and Brent crude oil futures rising by 1.86% to $71.66 per barrel. The geopolitical risks in the Middle East, particularly the tensions between the U.S. and Iran, are driving these price increases [7]. - Additionally, the U.S. Energy Information Administration reported an unexpected decline in weekly crude oil inventories, further supporting the rise in oil prices [8]. Gold Market - Gold prices saw a slight increase, with spot gold rising by 0.42% to $4,998.50 per ounce and COMEX gold futures up by 0.09% to $5,014 per ounce [9].