The Impact of Fed Hikes on Loans

Apollo Chief Economist

Since the Fed started raising interest rates, we have seen an increase in downgrades of loans and a rise in the share of loans trading at distressed levels, i.e. below 80, see charts below. This is the monetary policy transmission mechanism at work; higher costs of capital are having a negative impact on the economy.

Downgrades for leveraged loans have increased since the Fed started hiking
Source: Pitchbook LCD
Distressed ratio for leveraged loans has risen since the Fed started hiking
Source: Pitchbook LCD, Apollo Chief Economist. Note: For percent loans priced below 80.

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