Highlights

• Issuance: European leveraged finance issuance (leveraged loans and high yield bonds) increased in 2Q’16 to €52.1 billion, a 22.0% increase from €42.6 billion in 1Q’16 and a 6.5% decrease from €55.7 billion in 2Q’15. The quarterly surge stems from the large increase in high yield bonds issuance, whichincreased by 195.6% in the second quarter of 2016 while leveraged loan issuance decreased by 36.3%; the high yield bond share of the leveraged finance market increased to61%, up from 25.2% in 1Q’16 and up from 54.8% in 2Q’15.
• Market and Economic Environment: According to the July 2016 European Central Bank lending survey, in the second quarter of 2016, improving loan supply conditions for enterprises and the continued increase in loan demand across all loan categories suggested an ongoingrecovery in loan growth. The net easing on credit standards for loans to enterprises in 2Q’16 was stronger than the historical average calculated over the period since the start of the survey in 2003. Competition remained the main factorbehind the net easing of credit standards on loans to enterprises while risk perceptions and banks’ reduced cost of funds contributed only marginally to such easing.
• Issuance: Leveraged Loans: Leveraged loan issuance, including first lien, second lien, and mezzanine financing, decreased in the second quarter of 2016 to €20.3 billion, down 36.3% q‐o‐q (€31.9 billion in 1Q’16) and 19.2% down y‐o‐y (€25.2 billion in 2Q’15).
• Issuance: High Yield Bonds: Primary high yield issuance in 2Q’16 totalled €31.8 billion on 55 deals, a 195.6% and 4% increase by euro amount, respectively, from 1Q’16 (€10.8 billion on 22 deals) and2Q’15 (€30.5 billion on 58 deals). High yield bond issuance increased in both developed and emerging market Europe in the second quarter of 2016.
• Returns & Credit Quality:The U.S. HY Distressed Index led returns in the second quarter of 2016 with 21.6% followed by Global Fallen Angel HY Index (6.5%) and U.S. HY (5.9%). Nineteen out of 20 assetclasses examined recorded positive returns while Euro HY CCC and lower rated bonds (‐0.8%) recorded losses in 2Q’16.