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| Jon Macaskill is one of the leading capital markets and derivatives journalists, with over 20 years’ experience covering financial markets from London and New York. Most recently he worked at one of the biggest global investment banks |
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So a boom in high-yield bond and leveraged loan issuance has provided a welcome bright spot for bank chiefs already worried about how investors will receive their quarterly results.
The resurgence in leveraged debt issuance could also make a contribution to market stability – another welcome result as sovereign debt worries resurface and gloom about the global economy spreads.
The revived leveraged debt markets are starting to see a return of some features such as covenant-light loans that were symptoms of the credit bubble. But both absolute rates and spreads on new deals remain substantial, which indicates a realistic alignment of interest between lenders and borrowers. And an orderly flow of new deals that serves to reduce bunching in the future redemption schedule for high-yield borrowers could be an important factor in keeping down eventual default rates and unemployment.
