UBS 'Concerned' About Leveraged-Loan Fundamentals

UBS is increasingly concerned about the weakening fundamentals of leveraged loans and predicts that spreads will widen by the end of the year. Leveraged loans and private credit are expected to be the first to turn if the credit cycle ends. Despite a decent year-to-date return of 5.3%, leveraged loans lag behind high yield bonds, which have returned nearly 7%. Issuance of leveraged loans is significantly lower this year compared to last year. The floating rate aspect of loans is less appealing as concerns about rising rates diminish. Additionally, the influx of money into leveraged loans and private debt raises concerns about looser terms and potential issues in a downturn.

What is UBS's prediction regarding leveraged loans by the end of the year?

• Loan issuance will increase

• Interest rates will decrease

• Spreads will widen

• Spreads will narrow

How does the year-to-date return of leveraged loans compare to high yield bonds?

• Leveraged loans have a higher return

• High yield bonds have a higher return

• Both have the same return

• Leveraged loans have no return

What is the total issuance of new leveraged loans this year compared to last year?

• $300 million this year, $143 million last year

• $300 billion this year, $143 billion last year

• $143 billion this year, over $300 billion last year

• $143 million this year, over $300 million last year

What aspect of leveraged loans is causing concern due to changing interest rates?

• Fixed rate nature

• Floating rate nature

• Decreasing interest rates

• Stable interest rates

What are investors worried about in the leveraged loan market?

• Looser loan terms

• Stricter loan terms

• Increasing interest rates

• Decreasing loan demand