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Economic & Market Insights
For the week of October 3, 2022
Macro update
Incoming economic data points for August and September continue to paint the picture of decelerating growth for the U.S. economy. Stiff inflation headwinds and rising interest rates have taken a lot of steam out of consumer spending momentum since the beginning of the year. Even so, underlying trends have remained slightly positive as consumers have dipped into excess savings accumulated during the earlier stages of the pandemic to fuel recent purchases. As these savings deplete, a key question is whether enough relief is forthcoming on inflation to allow the wage gains over the past year to propel spending in the coming quarters. Nearer term, we estimate that 3Q GDP rose approximately 2%, helped in part by the narrowing trade deficit and inventory building.
Consumer confidence rose more than expected in September, going from 103.6 in August to 108.0, its highest reading since January, with assessments of both current and expected future conditions improved. Consumers’ views of the labor markets reflect the still-favorable environment with plentiful jobs. Notably, a near-record 18% of respondents intend to take a foreign vacation in the next six months (the stronger U.S. dollar is likely a driver of this, along with pent-up demand after pandemic-related restrictions).
After a half year of generally declining home sales, home prices are starting to roll over. According to reports, house prices slipped about 0.5% in July, the first month-to-month decline since early 2012. It looks like some of the West Coast post-pandemic highflyers are getting hit the most: Seattle was down 2.5%, and San Francisco was down 3.6%. New York City was flat, while Miami was up 1.4%.
The August Personal Consumption Expenditures price data showed inflation trends continuing to run significantly above the Federal Reserve's 2% target for this metric. The PCE core index was up 0.6% in August and increased 4.9% year over year (up from 4.7% year over year in July).
August was a soft month for real consumer spending growth, with a 0.1% uptick reported for the month. Though the recent trend has been softer than earlier in the year, we still think that real consumer spending is on track for a modest quarterly gain in 3Q of about 1% seasonally adjusted annual rate. Price increases have been cutting into income gains lately, and real personal income was down 2.3% year over year in August (real disposable income fell 4.5% year over year).
| Macro | Current | Prior |
| Durable goods orders | -0.2% | -0.1% |
| Consumer confidence | 108.0 | 103.6 |
| Core PCE year over year | 4.9% | 4.7% |
| Real consumer spending | 0.1% | -0.1% |
Markets update
Last week capped off a rough-and-tumble month for risky assets. Volatility jumped as investors shed stocks and bonds. With inflation still running hot and ongoing strength in the labor markets, markets are increasingly worried of a Fed overshoot: hiking rates so far it tips the economy into recession.
Equities hit a fresh year-to-date low, with the S&P down 25% and the Nasdaq down 32%.
Extreme volatility in U.K. gilt yields last week led the Bank of England to intervene with temporary asset purchases as a financial stability measure. This action also bolstered the British pound, which was trading as low as $1.07 early last week before rebounding to $1.12. The pound has depreciated 17% versus the U.S. dollar since the beginning of the year.
High-yield bond spreads widened the most since early July, contributing to a stall in capital markets issuance and decompression among ratings. While yields are now well above the previous high in June, HY spreads remain 52bp below the early July wide of 637bp.
Meanwhile, high-grade bond spreads reached a new wide for the cycle this week at roughly 190bp on the back of stress in the U.K. pension market and a jump in U.S. rates’ volatility. The move higher in spreads and yields is pushing down bond prices, and HG bond returns are down 18% year to date. HG bond yields at 5.7% are at a 13-year peak.
| Markets | 9/30/2022 | △ W/W | △M/M | △Y/Y |
| S&P 500 | 3,586 | (2.9)% | (9.3)% | (16.7)% |
| Nasdaq | 10,576 | (2.7)% | (10.5)% | (26.8)% |
| VIX | 32.32 | 8.0% | 24.9% | 39.7% |
| WTI ($/bbl) | $79.70 | 1.2% | (11.0)% | 6.2% |
| Brent ($/bbl) | $87.96 | 2.1% | (8.8)% | 12.0% |
| Natural Gas ($/mmBtu) | $6.79 | (0.6)% | (25.6)% | 15.7% |
| Gold ($/oz) | $1,662 | 1.1% | (2.9)% | (5.4)% |
| U.S. IG Yield | 5.81% | 27bp | 80bp | 307bp |
| U.S. HY YTW | 9.89% | 44bp | 119bp | 538bp |
| USD Spot Index | 1,337 | (0.2)% | 3.2% | 14.8% |
| Bitcoin | B19,495 | 3.4% | (3.5)% | (55.1)% |
Treasuries also experienced significant moves over the past week and month. Yields are at 15-year highs for the 2-year treasury and 13-year highs for the 10-year.
| Rates Monitor | 9/30/2022 | △ W/W | △M/M | △Y/Y |
| Fed Funds | 3.00-3.25% | 0bp | 75bp | 300bp |
| 1M CME SOFR | 3.04% | 1bp | 52bp | 298bp |
| 1M LIBOR | 3.14% | 6bp | 59bp | 306bp |
| 2yr U.S. Treasury | 4.26% | 6bp | 77bp | 398bp |
| 10yr U.S. Treasury | 3.82% | 14bp | 63bp | 234bp |
| 30yr fixed rate mortgage | 6.83% | 24bp | 88bp | 365bp |
Issuance / M&A volumes
While September brought the first >$1 billion IPO since January and about 10% of the leveraged credit issuance pipeline of $90 billion was placed, capital markets activity was quite muted overall amid significant market volatility and a pullback in investor risk appetite. A proposed high-yield issuance was pulled from the market last week.
In leveraged credit, the third quarter’s $23 billion of loan issuance is the lowest since 1Q10. Meanwhile, a 500-plus basis point year-to-date rise in HY yields (or +2x) is translating into the lightest annual HY bond issuance volume since 2008. And on a quarterly basis, third quarter HY supply totaling $19 billion is the lowest since 1Q09.
| Volumes ($ billions) | 2022 YTD | 2021 YTD | % Change | FY2021 |
| IPO | $6 | $113 | -95% | $152 |
| SPACs | $12 | $123 | -90% | $162 |
| Venture Capital | $181 | $251 | -28% | $330 |
| Investment Grade | $1,016 | $941 | 8% | $1,380 |
| High Yield | $90 | $400 | -77% | $484 |
| Leveraged Loans | $204 | $300 | -68% | $835 |
| M&A | $1,345 | $1,850 | -27% | $2,678 |
Chart of the week
Moderating slide in consumer confidence and sentiment
Source: Conference Board, University of Michigan.
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Archived Updates
For the week of September 26, 2022
Macro update
While the 75bp hike to the federal funds rate at last week’s Federal Open Market Committee (FOMC) meeting was expected, more focus was given to Chairman Jerome Powell’s commentary and the committee’s updated forecasts. The near-to-medium term outlook for interest rates, economic growth, inflation and unemployment were all revised in a downbeat direction.
The Federal Reserve’s projections now map higher interest rates, slower economic growth and a larger rise in unemployment (4.4% at the end of 2023 versus 3.6% currently) to reduce inflation. The interest rate forecast implies another 125bp of hikes between now and year-end—plus an additional 50bp of hikes in 2023. All in, the Fed sees the funds rate rising to 4.375% at the end of 2022 and 4.625% at the end of 2023.
For the FOMC to slow rate hikes, or even pause them, Powell pointed to three conditions: below-trend growth (meaning less than 1.8%); softening in labor market conditions; and inflation moving back to 2% (versus July core PCE of 4.6%. August figures will be released on Sept. 30).
Housing is one of the most sensitive sectors to changes in interest rates. Activity has slowed considerably over the past six months, with declining sales of existing homes and lower homebuilder sentiment. Previously owned U.S. home sales, which account for about 90% of U.S. housing, fell for the seventh straight month in August as higher mortgage rates challenge affordability. Homebuilder sentiment and permit applications are at their lowest level since mid-2020. Median selling prices have been declining since June, but are still 7 to 8% above levels in August 2021. This reflects lack of available supply given vacancy rates for owned and rented houses and apartments remain historically low.
Auto sales have also slowed in recent months due to some of the same reasons housing has slowed—limited supply, high prices and rising interest rates (more expensive financing). Auto sales on a seasonally adjusted annual rate have decreased roughly 9% to 13.6 million in 2022 compared with 14.9 million in 2021. While manufacturer inventories have risen 50 to 60% above last year’s levels, it’s still roughly 40% below the past 10 years’ average. Dealer inventories remain severely depleted, reflecting the ongoing chip shortage, which is constraining automakers’ ability to complete production and deliver finished goods.
Outside the U.S., policymakers in the UK announced a fiscal stimulus package involving sizable tax cuts on high earners and businesses to spur economic growth.
| Macro | Current | Prior |
| Federal funds target range | 3.00-3.25% | 2.25-2.50% |
| Housing starts | 1575k | 1404k (revised) |
| Existing home sales | 4.80m | 4.82m (revised) |
| Manufacturing PMI | 51.8 | 51.5 |
Markets update
There are rising concerns that aggressive central bank tightening (in the U.S. and abroad) will produce a weaker economy. This fueled a surge in volatility across markets and risk-off investor behavior. Stocks, bonds and commodities fell while the dollar strengthened. West Texas Intermediate dropped below $80 a barrel for the first time since January.
Stocks closed within 1 to 2% of their June lows; the S&P 500 is down 23% on the year while the Nasdaq is down 31%. Equity declines have been driven entirely by compression in valuation multiples as corporate earnings have proven to be resilient in the year-to-date period. The S&P 500 price to forward earnings multiple has dropped to 16 times from 21 times at the beginning of the year (the past 10-year average was 18 times).
Credit markets were also choppy, with wider spreads and higher yields. Although yields are near year-to-date highs, this reflects the ongoing rise in treasury yields as spreads are not at their widest levels of the year.
In currencies, the dollar reached fresh multi-decade highs. The British sterling sunk below $1.09. This is a 19% slide year-to-date—and the lowest level versus the dollar since 1985—amid a deteriorating economic outlook and record low consumer confidence. The Euro dropped below parity to $0.97, a 20-year low. As for the Yen, the Japanese government’s intervention efforts to prop up its currency failed to have a lasting impact, leaving the Yen roughly unchanged on the week.
| Markets | 9/23/2022 | △ W/W | △M/M | △Y/Y |
| S&P 500 | 3,693 | (4.6)% | (10.8)% | (17.1)% |
| Nasdaq | 10,868 | (5.1)% | (12.6)% | (27.8)% |
| VIX | 29.92 | 13.8% | 31.1% | 68.6% |
| WTI ($/bbl) | $78.74 | (7.5)% | (17.0)% | 6.4% |
| Brent ($/bbl) | $86.15 | (5.7)% | (14.9)% | 10.3% |
| Natural Gas ($/mmBtu) | $6.83 | (12.1)% | (26.8)% | 32.8% |
| Gold ($/oz) | $1,644 | (1.9)% | (6.1)% | (6.1)% |
| U.S. IG Yield | 5.54% | 23bp | 59bp | 289bp |
| U.S. HY YTW | 9.46% | 43bp | 119bp | 509bp |
| USD Spot Index | 1,340 | 2.4% | 3.9% | 16.1% |
| Bitcoin | B19,098 | (4.9)% | (12.0)% | (55.6)% |
Regarding the federal funds rate, we continue to expect a 50bp move in November and revised our December estimate to 50bp (from 25bp) given the FOMC’s updated guidance. We see another 25bp hike early next year, which would bring cumulative tightening to 425bp and the terminal target rate range to 4.25% to 4.50% (which compares to the Fed’s forecast for 4.625%).
The two-year treasury surged above 4% for the first time in 15 years, and the 2-year to 10-year inversion jumped over 50bp, the steepest levels in more than 20 years.
Mortgage rates (30-year fixed) have risen for six straight weeks to a new cycle high of roughly 6.6%, the highest level since 2002.
| Rates Monitor | 9/23/2022 | △ W/W | △M/M | △Y/Y |
| Fed Funds | 3.00-3.25% | 75bp | 75bp | 300bp |
| 1M CME SOFR | 3.03% | 1bp | 66bp | 298bp |
| 1M LIBOR | 3.08% | 7bp | 63bp | 300bp |
| 2yr U.S. Treasury | 4.20% | 33bp | 81bp | 393bp |
| 10yr U.S. Treasury | 3.68% | 24bp | 58bp | 223bp |
| 30yr fixed rate mortgage | 6.59% | 26bp | 67bp | 355bp |
Issuance / M&A volumes
Elevated levels of volatility in the equity and credit markets need to subside for the IPO market to reopen in a meaningful way. But a recent transaction successfully priced suggests select issuers with size, scale and a profitable financial profile could assess the merits of a near-term IPO.
In leveraged credit, some progress was made last week regarding expected issuance. Debt related to a leveraged buyout (LBO) was placed, albeit at a steep discount. The remaining forward calendar of roughly $70 billion to $75 billion represents a modest 3% of the high-yield and leveraged loan markets outstanding.
| Volumes ($ billions) | 2022 YTD | 2021 YTD | % Change | FY2021 |
| IPO | $4 | $103 | (96)% | $152 |
| SPACs | $12 | $118 | (90)% | $162 |
| Venture Capital | $164 | $217 | (24)% | $330 |
| Investment Grade | $937 | $938 | 0% | $1,380 |
| High Yield | $81 | $366 | (78)% | $484 |
| Leveraged Loans | $197 | $601 | (67)% | $835 |
| M&A | $1,386 | $2,432 | (43)% | $2,678 |
Chart of the week
Other major currencies have weakened versus the U.S. Dollar
Source: Bloomberg.
For the week of September 19, 2022
Macro update
Overall inflation has moderated slightly since June but remains uncomfortably high, and the persistence of core inflation points to further rate hikes by the Federal Open Market Committee. In August, headline CPI of 8.3% was down from 8.5% in July and 9.1% in June, largely reflecting lower prices at the gas pump. Energy inflation is now running about half of what it was in June. Food inflation, on the other hand, has yet to roll over, but it should start to as agricultural commodities prices are down 10% to 20% from peak.
Core services inflation, which includes the important shelter component that makes up one-third of the CPI, has accelerated and is proving a tougher area to rein in. Higher tenant rents price into the market gradually as contracts renew over time. Additionally, continued tightness in the labor markets is keeping upward pressure on wages and passing through to consumers in the more labor-intensive services sectors.
One bright spot around the otherwise disappointing inflation topic would be that consumers’ forward inflation expectations have been coming down. The three-year-ahead inflation expectation of 2.75% is the lowest since October 2020 and in-line with 2014-19 averages, a period when inflation was not a major concern.
The recent trends in retail sales indicate a U.S. consumer that is feeling some pressure from higher prices—but not pulling back in a meaningful way. It’s also likely consumers are shifting some discretionary spend to services like restaurants and travel after two years of above-trend goods purchases.
Although consumer spending has faced headwinds from inflation this year, we are not seeing particular signs of stress on household balance sheets. Credit card delinquency rates remain near historic lows, and, according to analysis from the JPMorgan Chase Institute, consumer cash balances remain significantly elevated for all income quartiles relative to pre-pandemic. At the end of June, median cash balances were 60% elevated for low-income families and 45% elevated for high-income families.
| Macro | Current | Prior |
| CPI year-over-year | 8.3% | 8.5% |
| Core CPI year-over-year | 6.3% | 5.9% |
| PPI Final Demand year-over-year | 8.7% | 9.8% |
| Retail sales month-over-month | 0.3% | -0.4% (revised) |
| Consumer sentiment | 59.5 | 58.2 |
Markets update
U.S. markets witnessed their worst day since June 2020 last Tuesday, September 13, as investors were spooked by the August inflation report that showed less cooling than expected, raising concerns of a historic 1% hike in rates when the Federal Reserve meets this week. Adding to the negative sentiment, a few bellwether corporates signaled weaker business conditions and ongoing supply chain challenges. All 11 S&P 500 sectors finished in the red last week, with healthcare and energy down less than the index as a whole, while tech, real estate and materials underperformed.
Oil declined for the third straight week amid a deteriorating outlook for the global economy.
High-grade bond yields rose to a new 12-year peak this week, driven by higher Treasury rates, while spreads were fairly stable. High-yield bond spreads were about 20bp wider on the week to 525bp. This is 250bp wider on the year and about 90bp inside the June wides of 636bp.
The U.S. dollar hit fresh highs against a basket of currencies, remaining around parity with the euro. The British pound took another leg down last week with a drop through $1.14 for the first time since 1985, accumulating a decline of 16% against the dollar so far this year.
| Markets | 9/16/2022 | △ W/W | △M/M | △Y/Y |
| S&P 500 | 3,873 | (4.8)% | (10.0)% | (13.4)% |
| Nasdaq | 11,448 | (5.5)% | (12.6)% | (24.6)% |
| VIX | 26.27 | 15.3% | 33.4% | 40.6% |
| WTI ($/bbl) | $85.28 | (1.7)% | (1.4)% | 17.4% |
| Brent ($/bbl) | $91.50 | (1.4)% | (0.9)% | 20.9% |
| Natural Gas ($/mmBtu) | $7.81 | (2.3)% | (16.2)% | 46.5% |
| Gold ($/oz) | $1,674 | (2.5)% | (5.7)% | (4.5)% |
| U.S. IG Yield | 5.28% | 11bp | 63bp | 270bp |
| U.S. HY YTW | 8.89% | 43bp | 116bp | 462bp |
| USD Spot Index | 1,309 | 0.8% | 3.1% | 13.9% |
| Bitcoin | B19,650 | (7.7)% | (18.1)% | (58.3)% |
Regarding the federal funds rate, we continue to look for a 75bp hike at this week’s meeting, and now expect a 50bp move in November (up from 25bp previously), followed by two more 25bp hikes in December and January-February. This would take cumulative tightening to 400bp and the terminal target rate range to 4.0%-4.25%. We believe the Fed will continue tightening policy until some slack is coming back into the labor market. Since that point in time is uncertain and given the lags between rate hikes and economic activity, we believe that later this year the FOMC could seek an offramp to smaller 25bp increments to reduce the risk of overshooting. If the labor market isn’t materially cooling by the January-February meeting, then we’d look for continued tightening in 25bp moves until that occurs.
Meanwhile, the market-implied terminal fed funds rate has risen to 4.50% by March 2023. The forward curve (three-year) has risen 110bp since early August, putting it above 4% for the first time since 2007.
| Rates Monitor | 9/16/2022 | △ W/W | △M/M | △Y/Y |
| Fed Funds | 2.25-2.50% | 0bp | 0bp | 225bp |
| 1M CME SOFR | 3.02% | 25bp | 73bp | 297bp |
| 1M LIBOR | 3.01% | 24bp | 64bp | 293bp |
| 2yr U.S. Treasury | 3.87% | 31bp | 61bp | 365bp |
| 10yr U.S. Treasury | 3.45% | 14bp | 65bp | 211bp |
| 30yr fixed rate mortgage | 6.28% | 20bp | 74bp | 328bp |
Issuance / M&A volumes
While public capital markets—IPOs and leveraged credit—are down sharply from last year, private markets issuance volumes are only down slightly from 2021-22 Q1 levels and still higher than 2020.
Crossover and public-style investors have been mostly on the sidelines in private markets, while growth equity and private equity have been more engaged, with records amount of dry powder to put to work. Investors continue to focus on profitability and fully funded business plans.
In high yield, the supply calendar is expected to increase in upcoming weeks after producing only $3 billion of issuance thus far in September.
| Volumes ($ billions) | 2022 YTD | 2021 YTD | % Change | FY2021 |
| IPO | $4 | $103 | (96)% | $152 |
| SPACs | $12 | $118 | (90)% | $162 |
| Venture Capital | $164 | $217 | (24)% | $330 |
| Investment Grade | $937 | $938 | 0% | $1,380 |
| High Yield | $81 | $366 | (78)% | $484 |
| Leveraged Loans | $197 | $601 | (67)% | $835 |
| M&A | $1,386 | $2,432 | (43)% | $2,678 |
Chart of the week
Inflation is still running high
Source: U.S. Bureau of Labor Statistics.
For the week of September 12, 2022
Macro update
While risk of recession in the U.S. remains elevated, the near-term outlook has improved somewhat as easing headline inflation, combined with strong labor markets, looks set to boost spending in the coming months. Significant narrowing in the trade deficit since the end of June should also contribute to 3Q GDP—a trend we do not expect to continue in future quarters given the stronger dollar. Net, we are looking for the U.S. economy to grow a muted 1-1.5% in the second half of this year.
With slowing demand and improving supply chains, inventory levels have risen sharply since last year. Wholesale and retail inventories are 25% and 20% higher than year-ago levels, respectively. While this could be cause for concern against a softer demand backdrop, much of the increase was likely due to a combination of necessary replenishment of depleted inventories and inflation. Relative to final sales, total nonfarm inventories are just now recovering to the pre-pandemic level of 2.38x, after being as low as 2.26x in September 2021, around the time of peak supply chain pressures.
Auto inventories, however, remain severely depleted as the ongoing semiconductor chip shortage continues to constrain automakers’ production rates. The auto unit inventory-to-sales ratio stood at 0.56x in June 2022 versus 2.23x in December 2019.
Regarding inflation, while headline is set to fall considerably in the coming months with retreating energy and food prices, wage inflation and housing rents are persistent and have yet to roll over. Business surveys suggest that wage pressures have subsided from peak levels, though average hourly wage growth is still extremely high at over 5%.
In Europe, policymakers are advancing proposals to buffer the impact of surging gas prices on consumers and businesses. While recession is more likely there, government supports could cushion the downturn.
| Macro | Current | Prior |
| Trade Balance | -$70.6bn | -$80.9bn |
| ISM Services | 56.9 | 56.7 |
Markets update
Stocks staged a strong rally over the short trading week, more than retracing the prior week’s sell-off, and volatility retreated towards the lower end of its past three months’ range. The Nasdaq outperformed the S&P 500, where gains were broad-based across sectors with notable strength in consumer discretionary. Through the end of last week, the S&P 500 is down 15% on the year while the Nasdaq is down 23%.
In commodities, oil prices hit an eight-month low, and gasoline prices are down 25% since their peak in June. Meanwhile, metals and agricultural prices have risen in recent weeks on supply concerns.
In currency markets, the dollar’s seemingly nonstop rally of late took a small breather last week. Meanwhile, the euro continues to trade near 20-year lows, the British pound recently touched the weakest level since 1985, the Chinese yuan is poised to break above the psychologically important level of 7.00, and the Japanese yen is trading at the weakest levels since 1998.
| Markets | 9/9/2022 | △ W/W | △M/M | △Y/Y |
| S&P 500 | 4,067 | 3.6% | (1.3)% | (9.5)% |
| Nasdaq | 12,112 | 4.1% | (3.1)% | (20.6)% |
| VIX | 22.84 | (10.3)% | 4.9% | 21.5% |
| WTI ($/bbl) | $86.21 | (0.8)% | (4.7)% | 26.5% |
| Brent ($/bbl) | $92.29 | (0.8)% | (4.2)% | 29.2% |
| Natural Gas ($/mmBtu) | $8.05 | (8.4)% | 2.8% | 60.0% |
| Gold ($/oz) | $1,716 | 0.2% | (4.4)% | (4.4)% |
| U.S. IG Yield | 5.19% | 10bp | 49bp | 259bp |
| U.S. HY YTW | 8.65% | (15)bp | 71bp | 434bp |
| USD Spot Index | 1,299 | (0.3)% | 2.1% | 13.5% |
| Bitcoin | B21,261 | 6.5% | (8.1)% | (54.0)% |
Interest rates continued to march higher last week as messaging from Federal Reserve officials points to further rate hikes and for policy rates to remain in restrictive territory “for some time.” We continue to expect a 75bp hike at the September meeting and 25bps at each of the November and December meetings. Assuming our forecast is correct, cumulative tightening for the year would be 350bp, the fastest rate hiking cycle in history.
Thirty-year fixed-rate mortgages have risen 84bp since the beginning of August, surpassing the prior peak in June and touching levels last seen in the 2006-08 time frame. Higher mortgage rates in addition to elevated home prices have contributed to a sharp slowdown in housing activity and turnover in the past six months.
| Rates Monitor | 9/9/2022 | △ W/W | △M/M | △Y/Y |
| Fed Funds | 2.25-2.50% | 0bp | 0bp | 225bp |
| 1M CME SOFR | 2.78% | 16bp | 47bp | 273bp |
| 1M LIBOR | 2.77% | 12bp | 39bp | 269bp |
| 2yr U.S. Treasury | 3.56% | 17bp | 29bp | 335bp |
| 10yr U.S. Treasury | 3.32% | 13bp | 54bp | 202bp |
| 30yr fixed rate mortgage | 6.11% | 6bp | 54bp | 307bp |
Issuance / M&A volumes
In leveraged credit, although issuance volumes are down sharply from prior year, markets have remained open and continued to price risk amid broader macro volatility. The current forward pipeline across high-yield bonds and leveraged loans is about $86 billion, with roughly half expected to launch in September. For context, the current pipeline represents about 3% of the overall institutional loan and high-yield market size. By comparison, in 2007 the pipeline totaled $485 billion or about 30% of the overall market. Bouts of volatility will impact leveraged credit periodically, but high-yield and leveraged loan markets should remain relatively resilient as a result of the manageable forward supply and elevated investor cash positions.
| Volumes ($ billions) | 2022 YTD | 2021 YTD | % Change | FY2021 |
| IPO | $4 | $103 | (96)% | $152 |
| SPACs | $12 | $118 | (90)% | $162 |
| Venture Capital | $164 | $217 | (24)% | $330 |
| Investment Grade | $937 | $938 | 0% | $1,380 |
| High Yield | $81 | $366 | (78)% | $484 |
| Leveraged Loans | $197 | $601 | (67)% | $835 |
| M&A | $1,386 | $2,432 | (43)% | $2,678 |
Chart of the week
Auto unit inventories relative to sales
Source: Bureau of Economic Analysis.
Meet Ginger
Ginger Chambless is Head of Research for Commercial Banking. In this role, she produces curated thought leadership content for CB clients and internal teams. Her content focuses on economic and market insights, industry trends and the capital markets. Connect on LinkedIn.
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