Credit Markets Update Q1 2025
Read more about M&A activity and trends in this sector
Credit Markets Update Q1 2025
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Credit Markets Commentary
The hot start to 2025 quickly cooled with market uncertainty and volatility as policy changes took effect
Caution: Curves Ahead!
- January optimism drove the first quarter of 2025 numbers to a solid level, before equity market volatility and major policy changes took effect in the month of February and March, souring investor sentiment
- 43% of the first quarter new Issue leveraged loan volume was recorded in January
- 48% of the first quarter M&A related leveraged loan volume was recorded in January
- 72% of the first quarter extension & repricing volume was recorded in January
- A fresh supply of loans pushed the non-refinancing volume to $79 billion in the first quarter, just shy of the three-year peak of $80 billion
- The broadly syndicated market continued to refinance direct loans at a quicker pace, re-capturing some of the share they lost to private credit lenders during the quantitative tightening
- However, investors’ declining appetite for risk started driving spreads wider, away from the record lows achieved in late 2024, impacting opportunistic-borrower deal flow
- Due to rising uncertainty, the high yield loan market finished the quarter at $68.5 during a typically busy part of the year. Refinancing via high-yield accounted for 66% of the total volume
- Federal reserve opted for a wait-and-see approach, sticking to the previously planned two rate cuts during 2025, while highlighting the possibility of rebound in inflation and economic slowdown
Tailwinds…
- Despite the initial uncertainty, the tariff policy could benefit the domestic market with manufacturing opportunities and jobs creation
- The new administration is pushing hard to enact tax cuts and de-regulation, which is expected to drive growth
- When the dust settles, sponsors sitting on aging portfolios are expected to quickly enter the M&A market, which would drive a new supply of loans
…Risks on the horizon
- A potential surge in inflation and economic slowdown due to tariffs may slow the pace of rate cuts. General volatility and lack of visibility could also disrupt the rate cut plans, if persisted
- Geopolitical risks including potential trade wars with major economies and an increase in hot conflicts around the world might be the tipping point for a recession
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Credit Markets Update Q1 2025
Read more about the credit markets activity during Q1 2025
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In today’s market, you need an advisor with objective insight at every step of the transaction process. We work with you throughout the full deal cycle to create value and successfully execute your deal strategy.
Howard P Lanser
Managing Director, KPMG Corporate Finance LLC
Howard P Lanser
Managing Director, KPMG Corporate Finance LLC