Ho hum…its that part of the cycle where people have lost their minds again. See: Junk loans top ’08 record as safeguards stripped
The amount of loans to the riskiest U.S. companies ballooned to a record this year, propelled by unprecedented demand for floating-rate debt that offers protection from rising interest rates.
The market for junk-rated loans increased to $683 billion, exceeding the 2008 peak of $596 billion, according to Standard & Poor’s Capital IQ Leveraged Commentary and Data. The $130 billion surge this year was fueled by borrowings that don’t include typical lender protections such as limits on leverage.
Loans, which suffered the biggest losses in the fixed-income market during the financial crisis, staged a comeback as investors funneled a record $64.4 billion into funds that buy the debt in anticipation the Federal Reserve would start unwinding its bond buying that’s suppressed borrowing costs. The demand has enabled companies to take on more debt for shareholder rewards, prompting regulators to warn that the excesses which contributed to the credit crisis may be creeping back.
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