Leveraged Loans Face Less Cushion in a Crash

Some have been warning recently that a crash in leveraged loans, one of Wall Street's hottest debt markets, could do investors a lot more damage than in the past. Investors, though, show little signs of concern.

Indeed, money has continued to race into leveraged loans. U.S. companies have raised nearly $1.4 trillion in the relatively risky lending market this year, up 46 percent from a year ago. The lack of concern could stem from prices, which despite the rush of money haven't climbed all that much. They are up from March but basically flat from a year ago. The yield on the average leveraged loan was 5.4 percent at the end of November, which is nearly the same as it was in the month a year earlier. And at least some of that rise is just a reflection that interest rates in general are up.