Year to date, the US leveraged debt market posted strong performance, with returns of 8.3% in the leveraged loan (syndicated bank loans) segment and 8.7% in high yield bonds.
In contrast to previous years, the short-term maturity profile of the leveraged loan market is heavily weighted toward lower-rated issuers (single B’s/CCC’s) compared to the high yield bond market, where most maturities in the upcoming year are concentrated within the BB rating category, indicating a relatively higher credit quality and lower defaults.
Nevertheless, we remain optimistic about the leveraged loan market, anticipating high single-digit returns driven by several supportive factors including coupons exceeding 7%, sustained demand from investors, robust CLO issuance and moderate increase of defaults. These structural strengths and positive dynamics are expected to underpin positive performance.
