U.S. leveraged finance issuance returned to earth last week as the high yield bond and leveraged loan markets began to digest jumbo deals launched to investors the previous week.
All told, there was $7.6 billion in leveraged finance issuance last week, a steep drop from the $19 billion the previous week – when Numericable bolstered activity all-around – and the least since the week of March 11, according to S&P Global Market Intelligence LCD.
Year to date, U.S. high yield bond issuance totals $51.6 billion, down roughly 55% from this point last year. Leveraged loan issuance totals $104.8 billion so far in 2016, down 9% from the same period in 2015.
While the volume numbers are unimpressive for last week – $4.6 billion in high yield and $3 billion in leveraged loan issuance – investor tone is improving across the markets. The best example of this might be activity on loans already launched, and still in the syndications process.
“In the new-issue market, the strength is on display, with arrangers flexing down 13 deals over the past two weeks, while flexing higher only three,” writes LCD’s Kerry Kantin. “The market hasn’t seen this many deals flex lower since the beginning of August.”
In the loan market, a ‘flex’ is when pricing on a deal is lowered (favoring issuers) or increased (favoring investors), depending on investor demand (there’s more info on price flexes here).
Similarly, new issuance in the high yield bond market was limited last week, though investor sentiment has improved and bids for paper in the bond secondary increased, highlighting better appetite in market, writes LCD’s Matthew Fuller.
Investors remained largely on the sidelines regarding loan and high yield funds last week. U.S. loan funds saw a small, $73 million withdrawal – the third straight for the asset class – while high yield funds saw a similarly unspectacular $84 million inflow.
This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.