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 has been the trend in the issuance of leveraged loans this year compared to last year?

What factors are causing concern among investors in the leveraged loan market?