Feds warn on lending froth

Trying to see around corners, the Fed and the OCC have sent letters to banks asking them to cool it with stripping covenants out of leveraged loans. Speculative-grade borrowers have raised $239.5B in so-called covenant-light loans this year, more than double 2012's amount. Leveraged loans - bank loans to non-investment-grade borrowers - in total have summed to $839.6B, threatening to topple 2007's record of $899B.

"The concerns they are expressing are not something we are seeing reflected in an increasing default rate,” says Elliot Ganz from an industry group. "If the agencies prevent the banks from underwriting leveraged loans, it’s pretty clear that some deals won’t get done."

Leveraged loan funds - BKLN, SNLN, SRLN, FTSL - have been among the hotter ETF classes this year.

From other sites
Comments (0)
Be the first to comment
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs