A Shrinking $1.3 Trillion Securities Market Is Bad News for the Economy
About 40% of issuers in this crucial area of corporate finance are yet to price a new deal this year. That’s an unwelcome signal for Wall Street — and business.
For a fleeting moment this month, investment bankers in leveraged finance — the lucrative lending that oils the wheels of M&A and feeds the $1.3 trillion market for collateralized loan obligations — had rare cause for cheer. Company valuations were enticingly low for dealmakers, the US Fed looked closer to reversing punishing rate hikes, loans were getting done.
A realization that Federal Reserve Chair Jay Powell isn’t ready to turn quite yet has put those Wall Street hopes on ice. Financing packages are stalling again. A CLO industry that boomed in the cheap money era, by bundling up slices of loans and selling them as bonds, looks particularly vulnerable to the freeze.