Credit Markets Update Q3 2021

Read more about the credit markets activity during Q3 2021

Mike Rudolph

Mike Rudolph

Managing Director, KPMG Corporate Finance LLC

+1 708-391-7342

The U.S. leveraged loan market is on a record pace for issuance in 2021 guided by strong investor appetitive for yield in the continued low interest rate environment

  • New issue loan volume continued its strong momentum to more than double from $89 billion in Q3-2020 to $198 billion in Q3-2021; volume remained flat when compared to the previous quarter
  • M&A loan volume climbed to $112 billion in Q3-2021, one of the highest quarterly totals in the last few years, on the back of robust M&A activity and low interest rates
  • M&A loan volume in the middle market (companies <$50MMEBITDA) also increased significantly, growing from $1.0 billion YTD ’20 to $6.1 billion YTD ’21
  • Refinancing volume continued to decline quarter-over-quarter falling 20% in Q3-2021 to $47 billion. Dividend recapitalizations surpassed full-year record, surged to $73 billion YTD Q3-2021, an increase of over 300% from YTD Q3-2020

New Issue Leveraged Loan Volume - Quarterly ($bn)

Source: LCD_Quarterly_2021_Q3: Volume: New-Issue US M&A Quarterly Loans, Pg 189

New Issue US M&A Loans - Quarterly ($bn)

Source: LCD Quarterly Q3, 2021: Volume: Quarterly US Dollar Denominated New-Issue Global Leveraged Loans. Pg 174


The high-yield bond issuance continued at a robust pace during Q3-2021 as borrowers rush to lock in costs sooner rather than later as rising inflation and inflation expectations prompted the Federal Reserve to hint at rate increases in 2022

  • High-yield debt issuance for the third quarter totaled $108 billion, down 21% quarter-over-quarter and 14.4% from the third quarter of 2020
  • High-yield bond issuance driven by M&A increased to $86 billion year-to-date. Refinancing accounted for 57% of issuance volume in Q3-2021, driven by issuers refinancing costlier loans raised in the pre-pandemic period
  • The average new-issue yields for high-yield bonds continued its record low trajectory, falling to 5.12% during Q3-2021; the yield stood at 5.32% in Sep-2021 as compared to 5.75% in the comparable period last year

High Yield Volume ($bn)

Source: LCD Interactive High Yield Report, Monthly & Quarterly Volume tab

High yield - Average new issue yields

Source: LCD Interactive High Yield Report, 'Monthly & Quarterly Yields' tab; Bond ratings ('BB' and 'B') to be sorted from 'Interactive Volume  & Yields' tab

Libor Transition - Update

  • Libor is expected to phase out and be replaced by SOFR (“Secured Overnight Financing Rate”) by the end of 2021. SOFR is based on overnight “repo” funding rates on transactions collateralized by Treasury securities, one of the deepest and most liquid markets in the world
  • One-month and three-month Libor benchmark rates will continue to be published solely for use with legacy contracts
  • Banks can face supervisory actions if they delay replacing the Libor benchmark in pricing new loans and financial contracts in 2022.

We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below.


Source: Standard & Poor | Leveraged Commentary & Data, Wall Street Research, Federal Reserve.


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