As market volatility eased and the prospect of rate cuts rose in the third quarter, leveraged loan issuance jumped, and high-yield bond offering activity was up too, Fitch Ratings reports.
In a report Friday, the rating agency said North American leveraged loans rebounded sharply in the third quarter, with issuance jumping to US$384 billion, up from US$114 billion in the previous quarter, driven by US$251 billion worth in July alone.
New issue activity then slowed in August, before bouncing back in September as rate-cut optimism returned.
The lending activity was “largely opportunistic,” Fitch said, as refinancings and repricings accounted for 74% of the overall volume.
At the same time, high-yield debt issuance climbed to US$121 billion in the third quarter, up from $81 billion in the previous quarter, it noted, as new issue activity in this segment was supported by a “constructive market tone and easing tariff volatility.”
Fitch said it modestly upgraded its financial forecast for the third quarter, with slightly stronger global GDP growth expectations, which was seen supporting firmer demand in autos, retail and certain parts of the leisure sector.
“Retail sales are expected to grow 2%-3% in 2025, pushing the consumer slowdown into early 2026. Housing remains a drag amid elevated mortgage rates, while travel demand is steady rather than accelerating,” it said.
Against that backdrop, credit quality trends also improved a bit in the third quarter, Fitch noted, although they stayed “slightly negative.”
Rating downgrades outnumbered upgrades for the third straight quarter, with 25 downgrades of North American speculative-grade issuers in the quarter, versus 22 upgrades.