We continue our special series on the outlook for the year ahead with a look at the capital markets. What are the moving parts impacting funds flow, asset characteristics (volume, prices, and yields), and quality of deal issuance?

With each passing day, the prospect for lower infection rates improves. Investors expect vaccine distribution to reach a tipping point soon with the US adult population, perhaps earlier than expected if logistical hurdles are overcome. Commercial activity could then resume “normal” levels.

The result of that newfound optimism has been further pressure on interest rates. As our Chart of the Week shows, the ten-year Treasury has stepped up 70 bps or so. At the same time, investors are moving up the Fed’s first anticipated hike date to mid-2024...

“If yields rise, then we could see some people rotating away from growth names and toward credit or bonds.” – Kiran Ganesh, global head of investment communications, UBS Global Wealth Management.

Featuring Charts

Chart of the Week: Interesting Rates

February 24, 2021

Expectations for an improved economy has driven yields and time to a Fed hike in opposite directions.

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Chart of the Week: Cover the Spread

February 17, 2021

First-lien middle market direct lending deals proved the best value vs. large cap and unitranches.

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Chart of the Week: Buy Often, Sell Often

February 10, 2021

A “whopping” 85% of direct lenders characterized deal flow expectations as equal or better than pre-Covid levels.

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Chart of the Week: Hot Spots

February 3, 2021

Reflecting investors’ preference for defensive sectors, business services led all industries for loans recently launched.

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Chart of the Week: Hope Springs

January 26, 2021

Most investors expect distressed loans to peak before the second half of 2021.

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Chart of the Week: Moving Business

January 19, 2021

Over the past two decades business cycles have increased the degree of correlation among asset classes.

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Features

Leveraged Loan Insight & Analysis – 2/22/2021

Leverage on US LBO deals stays at all-time highs this quarter Total leverage levels for US LBO loans remain high, averaging over 7.5x so far this quarter. 4Q20’s average of 7.2x was the all-time high tracked and that momentum has continued into 2021....

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The Pulse of Private Equity – 2/22/2021

Big bumps in IRR data PE returns bounced back in a big way in mid-2020, according to PitchBook’s upcoming Global Fund Performance Report. After cratering by -8.32% in the first quarter, IRRs were above 9% in both Q2 and Q3. The third quarter mark of 9.81% is preliminary data, but it would be the highest

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Private Debt Intelligence – 2/22/2021

Private Debt near-terms IRRs decline In comparison to its peers, private debt lags over short- and mid-term investment horizons. A downturn in Q1 2020 pulled the private debt asset class down to a one-year IRR of -0.8% to the end of June....

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PDI Picks – 2/22/2021

The climate change debate heats up Private debt managers have not been at the forefront of ESG in the past but times are changing. When we canvassed the opinions of limited partners about how seriously private debt fund managers take climate change, the responses were not exactly a ringing endorsement. Just 4 percent told our

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Leveraged Loan Insight & Analysis – 2/15/2021

Institutional loan refinancings jump in January to $39bn Refinancing deals dominated the institutional loan market in January, with US$39bn in volume for a 71% share of overall institutional loan activity, up from US$11.6bn in December and the highest monthly volume since pre-Covid February 2020....

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Middle Market Deal Terms at a Glance

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Special Report: Private Credit – Better than Ever

January 28, 2021

Beginning in August 2020 The Lead Left published a series of articles on the state of private credit in a COVID environment. This report consolidates those articles.

State of the Capital Markets – Fourth Quarter 2020 Review and First Quarter 2021 Outlook

January 14, 2021

Review of Current Market Conditions/ Analysis of Capital Markets Metrics/ Review of Credit Quality/ Outlook for First Quarter 2021

Special Report: COVID-19 and M&A Activity

December 1, 2020

Beginning in July 2020 The Lead Left published a series of articles on COVID-impacted deal flow. This report consolidates those articles.