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In Leveraged Loans, It's Beginning to Look a Lot Like 2008

The similarities between today’s leveraged loan market and the subprime market of the mid-2000s are "eerie," says Zandi of Moody's.

By Bernice Napach | Updated on August 21, 2018
Businessman with ball and chain (Image: Shutterstock)

Excessive leverage, which was at the root of the financial crisis in 2008 as well as the Asian financial crisis in 1997-1998, has resurfaced in the U.S. market.

Leveraged loan volumes are setting new records and nearing $1.4 trillion, making it larger than the $1.3 trillion high-yield bond market, according to Mark Zandi, chief economist of Moody’s Analytics. These loans, made to companies that already have considerable debt, have been increasing at double-digit rates over the past five years and about half have been securitized into collateralized loan obligations (CLOs).

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