US junk debt investors cautious of leveraged loans as economy slows
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Leveraged loan deals are expected to pick back up after a stabilization in markets over the past week; Borrowers pulled back on leveraged loan deals last week, following disappointing jobs data on Aug. 1 and Aug. 2; A total of six leveraged loans worth $3.3 billion sold last week, which falls well short of the $10 billion weekly average this year; One junk-rated loan deal sold on Monday, airline JetBlue Airways' five-year term loan; Leveraged loan funds reported $3.1 billion in outflows last week, which is the most since March 2020; The Morningstar LSTA US Leveraged Loan Index fell 0.55% on Aug. 5, the worst daily performance for the index since the collapse of Silicon Valley Bank in March 2023; A gap between net loan supply and investor demand since the Fed began hiking rates in 2022 should sustain demand for new loan deals through the end of this year; Further signs of an economic slowdown and aggressive Fed rate cuts could prove detrimental to certain leveraged borrowers' refinancing or new loan plans.



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