Capital Market Insights-Q2 2016

During the second quarter of 2016, acquisitive middle-market issuers capitalized on lenders’ increased risk appetite by entering into attractively priced and structured financings. The dramatic rally in Treasury yields (and other safe haven assets) triggered by the “Brexit” referendum at quarter’s end, augurs well for further improvement in domestic credit market conditions.

Other highlights include:

  • Demand for new issuance was driven by a strong crossover bid, a build-up of credit fund “dry powder” and modestly growthful macroeconomic conditions.
  • A marked increase in risk appetite this quarter among commercial banks in transactions. Conversely, we noted continued tepid demand from the mainstream BDC community.

  • While U.S. monetary policy took center stage briefly in June, weak labor market data kept the Fed largely on hold throughout the quarter.

  • Investment demand was strong among most genres of private market participants, in particular credit funds approaching investment period limits.
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