The value of US leveraged loans trading below 80 cents on the dollar climbed to $131B, the highest level of distress in that asset class since May 2020. Pitchbook data shows the current selloff is heavily concentrated among fundamentally weak borrowers, with $54B in CCC-rated loans trading below the 80 cent threshold—a volume that surpasses peaks seen during both the pandemic and the 2008 financial crisis. More than half of these distressed loans, 53%, are scheduled to mature within 3 years, raising the risk of defaults as liquidity dries up.
The strain extends to the broader junk bond market, where the effective yield on US CCC-rated and lower corporate debt has hit 18.0%. These assets have underperformed other high-yield bonds for two consecutive years, nearing a 3-year streak that has not occurred since the 1999 to 2002 default cycle. The volatility is driven by rising borrowing costs and investor fears that AI-driven disruption will impair the ability of indebted software, cable, and telecom companies to refinance their debt.