AFME is pleased to circulate its European High Yield and Leveraged Loan quarterly data report for the first quarter of 2025. The report provides detailed data and analysis on the issuance and credit performance for the high yield and leveraged loan markets.

Among the main findings of this report:

• European Leveraged Finance issuance (leveraged loans and high yield bonds) reached €148bn in proceeds in Q1 2025, a 16% increase compared to Q1 2024. This growth was driven by leveraged loans reaching €120bn - the highest quarterly figure on record.

• High Yield Bond issuance totaled €28.8bn in proceeds in Q1 2025, a 29% year-on-year decrease.

  • The primary use of proceeds was general corporate purposes, accounting for 47% of total issuance, followed by refinancing (41%) and LBOs/MBOs (11%).

  • Three sectors accounted for 59% of the high yield market by outstanding amount: Financial, Consumer Discretionary and Communications.

• Leveraged Loan origination stood at €119.5bn in the first quarter of 2025, a 35% increase from Q1 2024.

  • In Q1 2025, institutional spreads (3-month rolling average) tightened from 371 bps in December to 341 bps in March, while pro-rata spreads dropped sharply from 280 bps to 200 bps by the end of the quarter. Consistent with previous quarters, institutional spreads remained above pro-rata spreads.

  • The Healthcare sector emerged as the leading sector by loan origination amount in Q1 2025, followed by Professional Services and Computers & Electronics.

• Credit Quality: S&P’s trailing 12-month speculative-grade bond default rate ended the quarter at 4.1%, declining from its peak of 5.1% in November. Moody’s reported a similar trend, with the speculative-grade bond default rate falling from 3.6% in November to 2.5% by the end of the quarter.

  • Moody's and S&P reported 12 bond defaults during Q1 2025, which were mainly due to distressed exchanges and missed payments.

  • According to Fitch, the European leveraged loan trailing 12 months (TTM) default rate stood at 1% in March 2025, down from 1.8% in December 2024.

• Tariffs announced by the U.S. Government in early April 2025 triggered diverse market reactions. Although not covered in detail in this report, as data of May 20 we observed:

  • Both the iBoxx EUR HY and iTraxx XO 5Y high yield indexes experienced sharp increases, rising from 366 bps and 328 bps to peaks of 453 bps and 409 bps, respectively, by April 7.

  • The European leveraged loan price index (EURO Lev 40) dropped moderately from 97.7 bps at the end of March to 94.8 bps on April 7, tough stabilising around 96 bps by mid-April.

  • Leveraged loan issuance fell sharply in April following the record high in Q1 2025. In contrast, high yield bond issuance appeared unaffected by the tariff announcement.