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(Bloomberg) — Generative AI is set to transform the way credit traders do their jobs, as the technology is well suited to handling the unstructured data produced by the asset class, according to JPMorgan Chase & Co.’s global head of credit trading.
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Credit markets are the last frontier when it comes to market automation, Sanjay Jhamna said in an interview with Bloomberg TV at JPMorgan’s global leveraged-finance conference in Miami, adding that traditional AI models have not necessarily been a good fit for the asset class.
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As firms begin to use generative AI more, the whole industry will be affected. “It will reset who can compete and how they can compete,” Jhamna said, adding that winners and losers will be determined by how much companies embrace the opportunities from new technology.
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Investors are currently scrambling to get to grips with the various ways AI is affecting the credit market. On one hand, there is growing anxiety that generative AI will cannibalize the business models of software issuers, a cornerstone of the leveraged finance and private credit universes. On the other hand, hyperscalers are flooding the investment-grade and infrastructure debt markets with record issuance to fund the build-out of data centers.
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Current dislocations in the credit market are creating opportunities to deploy capital at interesting levels, Jhamna said. Credit is “the asset class of the moment” and noise around software is a normal part of a typical credit cycle, he said.
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As for the threat that AI poses to existing borrowers, the JPMorgan banker said that it is normal for some consolidation to follow massive increases in productivity. There will also be big winners — companies that harness the power of the new technology to gain share — he said.
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In terms of the conflict in the Middle East, Jhamna said that JPMorgan’s clients are looking past the weekend’s events at the moment. Investors will be attentive to energy prices and rates, which are particularly relevant for credit, he added.
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—With assistance from Abhinav Ramnarayan.
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English (US)