Leveraged finance (LevFin) issuance across the US and European institutional loan and high-yield (HY) bond markets totalled USD 126bn in year-to-date (YTD) 1Q23, marking a 37% decline from the same period a year ago, but a 56% rise on 4Q22.
Bullish sentiment to start of the year, underpinned by expectations of a softer economic downturn and less hawkish interest-rate rises as inflation appeared to be easing, created favourable market technicals for primary issuance. HY bond funds started attracting inflows and collateralised loan obligations (CLOs) were boosting issuance, fuelling demand for paper and allowing borrowers to raise debt at tighter pricing. Although new-money paper was thin on the ground, with refinancing and liability management exercises accounting for the bulk of HY bond and loan issuance, market players were hopeful that a period of extended stability would lead to a resurgence in M&A activity.
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