- Spreads on high yield bonds and senior secured loans have declined approximately 50 and 16 basis points, respectively, from the beginning of 2017.1,2 For high yield bonds, spreads are down more than 500 basis points from their highs in February 2016.1
- Taken together, these conditions have led to an extraordinarily issuer-friendly environment. Driven by refinancings and repricings, for example, the first quarter of 2017 saw the highest volume of senior secured loan issuance ever.3 Year to date, approximately 80% of new senior secured loan issuance has been earmarked for refinancing or repricing, a jump of more than 55% from this point in 2016.3
- Issuance volume within the high yield bond market is lighter than in the senior secured loan market, though it is well ahead of last year’s pace.3 As the chart indicates, the majority of the new-issue activity year to date has also been driven by refinancings.
- While investors have experienced strong returns in both asset classes, yields have declined in 2017 amid ongoing demand as investors continue to seek out higher-yielding investments in today’s low interest rate environment.
1 Bank of America Merrill Lynch U.S. High Yield Master II Index.
2 Credit Suisse Leveraged Loan Index.
3 J.P. Morgan High-Yield and Leveraged Loan Morning Intelligence, April 28, 2017.
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