Weekly Market Summary

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• Investment-grade issuance in September was $125 billion, which was about in-line with the past four-year average of $129 billion. For the quarter, investment-grade supply was $286 billion, which was down 4% versus the average pace of $297 billion. Overall, year-to-date supply totals $998 billion. Looking ahead, supply in October typically slows versus September (18 out of 23 years in our history). Issuance has averaged $88 billion in October and $100 billion in November over the past four years, excluding 2020). There were two key trends in the third quarter: an increase in floater supply and a dearth of long-end issuance. The average maturity of new issues in third quarter was 8.3 years, the lowest quarterly average tenor since the third quarter of 2008.
• High-yield capital market activity increased to its highest since January 2022. Specifically, $24.6 billion of high-yield bonds priced in September. High-yield issuance totals $137 billion year-to-date, which compares to $90 billion year-to-date 2022.
• Leveraged-loan gross issuance totaled $58 billion in September, the highest since November 2021, albeit only $17.3 billion was excluding refinance. As such, year-to-date institutional loan issuance totals $258 billion or $59 billion net of refinancing/re-pricing, compared to $205 billion or $145 billion last year.
• U.S. collateralized loan obligations (CLOs) gross supply in September totaled $12.5 billion from 28 CLOs. This was the third heaviest gross issuance month in 2023. U.S. CLO gross supply now totals $93 billion, which is down -27% year-over-year, and new issue supply is down -21% year-over-year.
• Default activity moderated in September following an active August. As well, distressed exchange activity outpaced default activity for a fourth consecutive month, and as a result, distressed transactions now equal defaults on a year-to-date basis. Specifically, one company defaulted and three completed a distressed exchange in September totaling $3.1 billion in bonds and loans ($1.8 billion in bonds and $1.3 billion in loans). By comparison, 11 companies defaulted or completed a distressed transaction in August totaling $6.1 billion. For context, a monthly average of $7 billion of bonds and loans have been affected by default/distressed exchange activity thus far in 2023. Default/distressed exchange volume totaled $11.5 billion in the third quarter, the lowest quarterly total year-to-date, following elevated totals of $30.8 billion in second quarter and $20.8 billion in the first quarter.
• The trailing 12-month default rates for bank loans and high-yield bonds, excluding distressed exchanges, finished the month at 1.90% and 1.32%, respectively, down from 2.24% and marginally higher from 1.29% from August. The long-term historical default rate for loans and high-yield bonds is 3.1% and 3.2%, respectively.

Sources: Bloomberg and JP Morgan as of 10/3/23.