Credit Markets Update Q1 2023

Read more about the credit markets activity during Q1 2023

Mike Rudolph

Mike Rudolph

Managing Director, KPMG Corporate Finance LLC

+1 708-391-7342

The leveraged loan market was off to a decent start in 2023 before becoming abruptly undone in March, as investor confidence dwindled due to heightened recession fears amidst high profile bank failures

  • First quarter new issue leveraged loan volume reached $65.3 billion, down sharply from $167.4 billion in the first quarter of 2022, and just behind $67.0 billion in the preceding quarter, hitting the lowest loan volume since 2016
    • It was a promising start to the year in the leveraged loan market as opportunistic refinancings were brought to market to address near term maturities, before being derailed due to concerns over an economic downturn as a result of a SVB-led banking crisis

New Issue Leveraged Loan Volume ($bn)

  • Refinancing volume continued strong momentum from the fourth quarter, marking $43.0 billion in the first quarter to record the highest quarterly total in the past 24 months
    • Amid muted M&A activity, refinancing volume captured 66% of the total supply in the quarter, compared to M&A at 20%
    • Over 68% of refinancing volume mix was composed of single-B rated issuers, a significant increase from 27% in the prior quarter

Count of LBOs financed in broadly
syndicated vs private credit markets

  • Private credit remains the financing of choice for buyouts. Direct lending continued to take share of M&A volume and expanded its lead on the number of syndicated loan transactions

High Yield - Average New Issue Yields

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

High Yield Volume ($bn)(1)


Investor hopes of a Fed-led soft landing for the economy drove January and February to the first double-digit high yield monthly volume totals since October-November 2021, before collapsing in March

  • First quarter volume of $40.6 billion is the second lowest volume since the global financial crisis
  • The average yield at issuance declined significantly to 8.0% at the end of first quarter, before recording 7.81% in February

Secured Overnight Financing Rate (SOFR)

Source: New York Fed; 90-day Term SOFR rate

The Federal reserve raised interest rates twice in 2023 despite banking system turmoil, citing high inflation and tight labor market. After nine consecutive interest rate hikes, the Federal reserve is expected to hike one more time (before a pause) to meet the targeted 5.1% by the end of 2023

  • SOFR closely tracks the federal funds rate, inching closer to 5.0% at the beginning of April 2023
  • While the Federal Reserve continues to pronounce confidence in the U.S. banking system, a recession caused by over-tightening remains a common fear, as high interest rate continue to affect the value of Treasuries and other securities, a critical source of capital for most U.S. banks

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.


Get the latest updates to KPMG Corporate Finance LLC industry insights

Related content