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September 25, 2026
Partner, Chief Economist
Higher for longer is a slow squeeze for low-quality credit. Every month rates stay elevated, more CCC borrowers from the 2021–22 vintages hit the refinancing wall with less cash to service their debt, and with CCC yields around 15% while the broader credit market stays calm, the bill from the cheap-money era is landing on the weakest balance sheets first.
The pain is sharpest in heavily levered, PE-backed technology, healthcare and consumer discretionary names, where floating-rate debt, thin margins and AI disruption risk leave little room to absorb years of elevated borrowing costs.
The bottom line is that monetary policy is working with a lag and working unevenly. Strong balance sheets locked in cheap fixed-rate debt and have barely felt the Fed's tightening, while the most leveraged borrowers feel it in full as floating-rate costs and maturities reset, so the transmission mechanism is running mainly through the bottom of the credit stack.
For investors, the message is to move up in quality, because high-quality credit still offers attractive all-in yields without the default, restructuring and liability-management risk that is now concentrated in lower-rated credits.
In short, it is a good idea to invest in companies with earnings because they can pay their higher debt-servicing costs.
Sources: Bloomberg, Macrobond, Apollo Chief Economist
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