The issuance of syndicated loans, including leveraged loans, has grown substantially in the US. Institutional investors increasingly hold these loans. This column discusses how this has created a strong link between the dollar and US corporate credit conditions. When the dollar appreciates, institutional investors demand fewer loans on the secondary market, causing US banks to reduce lending and tighten credit standards. Risk appetite in global capital markets has become a key driver of credit supply to US firms.
Friederike Niepmann, Tim Schmidt-Eisenlohr, 06 February 2019
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