Leveraged Loans Are Sending Signals of Credit Stress: Macro View

Sudden debt market blowups are happening at the same time as ever-tighter junk spreads facilitate the biggest leveraged buyout of all time. Portfolio managers with more cash than investment options are turning a blind eye, but there are signs of more trouble ahead.

• The loan market is a pressure point for credit and a bearish signal for private markets. There’s more distress coming but the pain looks contained so long as the US economy doesn’t tip into recession.
• Leveraged loans have rallied, even as Federal Reserve easing reduces the appeal of floating-rate debt. Investors are betting lower rates will alleviate ...