Finance
Wall Street Banks Trade Derivatives to Bet on Pain in Private Credit, Ft Reports
Published by Global Banking & Finance Review®
Posted on April 17, 2026
2 min readLast updated: April 17, 2026
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Wall Street banks including JPMorgan and Barclays are using credit default swaps tied to private credit funds managed by Blackstone, Apollo and Ares to bet on possible distress in that sector, as turbulence in private credit mounts.
Wall Street banks trade derivatives to bet on private credit stress, FT reports
Wall Street Banks Enter Private Credit Derivatives Market
Major Banks Involved in Credit Default Swaps Trading
April 17 (Reuters) - JPMorgan Chase, Barclays and other Wall Street banks have started trading credit default swaps linked to flagship private credit funds run by Blackstone, Apollo Global and Ares Management, the Financial Times reported on Friday.
Banks including Morgan Stanley and Citigroup were offering to trade contracts on the three funds, the FT report said, citing people familiar with the matter.
Verification and Responses
Reuters could not independently verify the report. JPMorgan, Barclays, Morgan Stanley, Citigroup, Blackstone, Apollo Global and Ares did not immediately respond to a Reuters' request for comment.
Understanding Credit Default Swaps and Private Credit Funds
What Are Credit Default Swaps?
Credit default swaps (CDS) are derivatives that act as insurance against the risk that a bond issuer - such as a company, bank or government - fails to repay its debt.
Private Credit Funds Under Stress
Private credit funds are facing their most serious stress test since the sector's rapid expansion following the 2008 financial crisis.
Recent Developments in the Private Credit Market
The news comes as S&P Dow Jones Indexes launched another credit-default swap index linked to the private credit market last week, giving investors a tool to bet against a sector that has faced turbulence in the last few months.
Reporting and Editorial Information
(Reporting by Chandni Shah in Bengaluru; Editing by Mrigank Dhaniwala and Sherry Jacob-Phillips)
Key Takeaways
- •Major banks are leveraging a new CDS index linked to private‑credit funds, signaling growing concern about stress in that asset class
- •Private credit funds like Apollo Debt Solutions BDC, Ares Strategic Income Fund and Blackstone’s BCRED face mounting redemption requests and valuation pressure
- •These CDS trades offer investors a novel tool to hedge or speculate on rising credit risk in the largely opaque private‑credit market
Frequently Asked Questions about Wall Street banks trade derivatives to bet on pain in private credit, FT reports
1Which banks are trading derivatives on private credit?
JPMorgan Chase, Barclays, and other Wall Street banks have started trading credit default swaps on private credit funds.
2Which private credit funds are involved?
The credit default swaps are being traded against flagship private credit funds run by Blackstone, Apollo Global, and Ares Management.
3What type of derivatives are being traded?
Credit default swaps are the primary derivatives being traded on the private credit funds.
4What is the reported source of this news?
The report comes from the Financial Times as referenced in the article.