The US leveraged finance market hit $3 trillion in volume in August for the first time ever, according to S&P Global and LCD indexes.
The indexes, which track the high-yield bond and leveraged loan segments, more than doubled in size amid fast growth in sub-investment-grade borrowing between the 2008 financial crisis and the 2020 pandemic-driven crash, S&P Global said.
In 2009, the LCD’s S&P/LSTA Leveraged Loan Index and the S&P US High Yield Corporate Bond index had respective year-end market sizes of $529 billion and $792 billion, which S&P Global said was “the official start of a record-setting bull market run”.
At the end of 2019, total leveraged loans grew 127 percent while high-yield bonds rose 92 percent. The high-yield asset class has led the charge in growth, S&P Global said, despite a short crash in 2020 with increased outstandings of $144.7 billion since the second quarter of 2020. In all, the leveraged loan market is valued at $1.28 trillion, growing $68.2 billion since that time, according to the index.
High-yield activity has bounced back which S&P Global said followed the US Federal Reserve’s bond buying spree. Historically low yields contributed to a rise in refinancings, representing 71 percent of supply during the first half of 2021.
Another record high, S&P Global said, was the $435 billion in high-yield debt issued in 2020. Of this amount, $48 billion, or 11 percent, was accounted for by mergers and acquisitions which S&P says is a “lifeblood of net new issuance in the leveraged finance world”. M&A-related issuance accounted for on average 27 percent of high-yield supply in the five years leading up to the end of 2019.