US credit markets are now seeing a sudden decrease in volumes as fund managers are rejecting deals and investors are fading away from high-yield bond sales as interest rates rise and increased volatility has become the norm in markets.
Currently, when we look at this month in terms of borrowing in the high-yield, and expanding $1.2 trillion bond market, not one major player has gone to this market to engage investors. No one is borrowing, no one. If there is no borrowing the entire month, then this will be the first month since November 2008 that the market went completely dead. Given the timing of the drying up of this market, the November and December period, one would be inclined to point to the seasonality factor but note that this is more than just an end-of-year market, it is a typical end of a credit cycle type market.
Finally, it is important to note that banks that have been committed to financing highly leveraged buyouts this year have had a challenging time lately in finding investors to back these deals. Some lenders have been forced to offer loans at substantial discounts to encourage investors, others on the other hand have scrapped their plans on key deals.
More on this topic in the coming weeks,