Sub Investment Grade Market

EMEA benchmark bond spreads by rating category As of August 23, 2021

Sub Investment Grade Market - Market observation per 23 August 2021 -

Eurozone leveraged finance gearing up for a strong opening in September

  • Benign market conditions have prevailed throughout the summer
  • Stable yields, compressing BB to B yield spreads, low market volatility, a positive macro and monetary outlook and historically low default rates signal a strong opening after the break
  • The resurgence of private equity and corporate M&A is expected to carry through in a busy financing pipeline for September and October
  • Stable yields and a strong M&A pipeline will leave little room to focus on repricing and recapitalisations
  • With loans and bonds being equally attractive, the difference in relative value will need to be tested on a case by case basis

Direct lending reaching market saturation

  • Backed by ample liquidity, direct lenders have jumped into the gaps resulting from banks focusing on the aftermath of the Covid crisis and increased central bank scrutiny of leveraged finance exposures
  • Resulting in a near saturation of the mid-market and triggering a resurgence of capital structures mixing bank and direct lending commitments
  • Reaching beyond the mid-market, direct lenders are increasingly challenging the institutional syndicated loan markets with a competitive pricing, an ability to write ever larger tickets and a quicker process