By Niket Nishant

Dec 9 (Reuters) – Private credit defaults are set to edge lower next year as interest rates drop, strategists at BofA Global Research said, but warned that the ‍red-hot sector remains among the most fragile parts of the U.S. credit market.

The brokerage expects default rates to ease to 4.5% in 2026 from 5% this year as the U.S. Federal Reserve cuts rates, offering a reprieve to an industry that has come under scrutiny following ‌the bankruptcies of First Brands and Tricolor.

Private credit ‌loans are typically tied to a floating rate, meaning their interest payments move in line with changes in the benchmark rate.

Still, opaque lending structures and a heavy tilt toward technology and services, areas most vulnerable to AI-driven disruption, amplify the risks, the analy

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