Weekly Market Summary

Extra Credit^*

• Investment-grade corporate-bond gross issuance in August was $107 billion, up 27% vs the prior 4-year average (excluding 2020). Supply came primarily from non-financials ($92 billion) at a 86% share, which is the highest proportion since August 2019. Overall, this brings the year-to-date non-financial supply tally to $684 billion and financials tally to $420 billion. Year-to-date supply of $1.1 trillion is 74% of market forecasts for 2024, which called for $1.5 trillion for the year. Seven out of 17 sectors have issued more than 80% of their respective 2024 sector forecasts.

• High-yield bond supply in August was another lighter month, with issuance totaling $18 billion ($6 billion excluding refi). High-yield new-issue volume totaling $203 billion ($44 billion non-refi) year-to-date compares with $112 billion ($41 billion excluding refi) of issuance during the same period of 2023.

• Leveraged-loan gross issuance in August also slumped to a year-to-date low, with $26 billion ($9 billion excluding refi/repricing). Year-to-date, institutional-loan issuance totals $811 billion, which includes $93 billion of non-refi/repricing (11%).

• U.S. CLO gross supply in August was $45.8 billion ($15.4 billion new and $30.4 billion refi/reset/re-issue), which was the third heaviest month of all time. (The $30.4 billion of refi/reset/re-issue supply was the second heaviest month of all time). Year-to-date, U.S. CLO gross supply is now $292.9 billion, which includes $129 billion of new supply and $164 billion of refi/reset/reissues.

• Across bank loans and high-yield bonds, three of the six companies to default or complete a distressed exchange in August were repeat defaulters.

• Through the first eight months of 2024 there have been 56 defaults/distressed exchanges across high-yield bonds and leveraged loans, 19 of which have previously defaulted or completed a distressed exchange. As such, a historic high 34% of default actions year-to-date have occurred via a repeat offender. For context, a record-high 29 of 94 defaults/distressed transactions (31%) were repeat defaulters in 2023.

• Since 2008, 183 or 18% of the 1,038 default actions were repeat offenders; at an issuer level, 164 (19%) of 869 issuers were repeat defaulters. Of these 183 repeat default actions, 33 were distressed exchanges followed by another distressed exchange with an average time lapse of 1.8 years (median: 0.7 years); 74 were distressed exchanges followed by an eventual default with an average time lapse of 2.3 years (median: 1.1 years); 61 were when a company defaulted twice (Chapter 22) with an average time lapse of 3.5 years (median: 3 years); and 15 were situations where the issuer defaulted, emerged, and then did a distressed exchange with an average time lapse of 5.9 years (median: 3.8 years).

• Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month both at 1.18% for high-yield bonds and 0.98% for bank loans, down and up from 1.40% and 1.16% in the month prior. This is also well below the long-term historical default rate of 3% for loans and 3.4% for high yield, and the historical post-GFC default rates of 2.3% and 2.5%, respectively.

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Sources: Bloomberg and JP Morgan as of 9/4/24.