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The credit markets have lost their summer chill. Is that just the way things are now?

The market mantra used to be to ‘sell in May and go away’. Bankers and investors enjoy vacations as much as anyone else, and summer is the time to take them; liquidity dries up as trading slows, and primary issuance falls as senior decision-makers take a breather.

That credo may have originated in the stock market, but it used to ring true for credit as well — at least until recently, when the summer slowdown all but disappeared.

We mined the 9fin database (recently expanded after our acquisition of BondRadar) to prove it. As the chart below shows, barring the pandemic-addled period of 2020 and 2021, this has been the busiest summer for most types of corporate debt since at least 2019.

For instance, US dollar issuance across high yield bonds, investment grade bonds and leveraged loans from this June through August is up 122% compared to the summer of 2019. It’s not just this summer either — over the last two years, issuance across those three asset classes was greater than $600bn. Only the infamous summer of 2020 got anywhere close.

“It feels like the holiday season has gotten ripped away,” said a LevFin buysider.

Even if companies haven’t hit the primary yet, the sellside is working behind the scenes to line up deals. No one is quite shedding tears just yet — but multiple bankers told us they had to cancel family vacations this year in order to work on structuring upcoming M&A-related debt issuance that is set to hit the market after Labor Day.

Circumstantial factors

There are several transitory reasons that account for why supply is up so dramatically this summer.

Spreads are at all-time lows which is bringing some issuers to the market even if elevated benchmark rates are keeping all-in funding costs high. Borrowers are coming to grips with a higher for longer mindset and are willing to lock in these low spreads before some other macro event disrupts the market (though they’re keeping maturities short).

“It’s such a seller’s market because when you have super tight spreads, as an issuer you’re going to take what you can,” the buysider said. “And because private equity can’t actually sell their businesses, they have to do dividend recaps and repricings instead.”

That mindset is pulling forward some issuance into August that was expected to come during the ever-busy September borrowing spree, including deals from pharma name Eli Lilly and telecoms firm Charter Communications, said a portfolio manager.

There are also a handful of borrowers that delayed issuance after the April tariff announcements injected a fair amount of uncertainty into the market; they are now returning to raise debt with more clarity around trade.

"The market kind of froze solid in April and May of this year following the tariff uncertainty,” a high yield bond analyst said. “When it came back, people were catching up on deals.”

M&A activity is also picking up, and while it may take 6-9 months for those deals to hit the primary, some borrowers are choosing to prefund those deals early if they can. For example, IG borrowers such as CVS, Chevron and Merck KGaA have come to the market recently to fund upcoming deals.

Systemic changes

Yields, spreads, Treasuries and corporate outlooks change with the years, but there are also some broader and perhaps more permanent changes that have allowed for this summer’s surge in supply.

Namely, in a post-pandemic world it’s easier than ever for bankers to execute a deal remotely from a beach house, and for senior PMs halfway around the world to dial into an investment committee call while the kids are sleeping.

It’s not just a US phenomenon either. European bankers and investors are finding it easier to keep business flowing even while on holiday. Combined Euro and Sterling debt volumes have risen every summer since 2022, according to 9fin data:

These behavioral factors help explain why volumes are up from pre-pandemic levels, but the surge in summer issuance over the last two years has more to do with the sheer volume of liquidity in the market.

Cumulative investment grade, high yield and leveraged loan fund flows are up to 17% of assets under management since August 2023, according to BofA research. All three of those asset classes saw large fund flow increases over the summer in particular as the market gained distance from the April tariff announcements.

Some see this liquidity surge as sustainable in part due to the increase in portfolio trading. The bundling of securities trading — rather than buying or selling individual securities — is at an all-time high and helps keep the market churning even when folks are away from their desks during the late summer months.

“Portfolio trading has really taken off in the last two years,” the IG portfolio manager said. “If you look at some of the estimates now it basically accounts for 25% of the market.”

Repricing surge

The largest volume increases are coming from leveraged loans this summer. That’s evident both in the raw number of US loans priced as well as how much CLO issuance has risen in recent years.

New CLO issuance — which is mostly tied to new loan supply — even surpassed 2020 volumes this summer:

However, the majority of that loan supply comes from the repricing of existing instruments. Leveraged loan supply is up 45% this summer over last year and 58% of total supply is to lower the spread on existing instruments.

"August has been a little bit busier than past history, but it's not a good busy," said Frank Ossino, senior portfolio manager at Newfleet Asset Management. "We're doing all this work to give up spread."

Even without all that repricing supply, other loan volumes still came in at $137bn — far more than what was pricing in the early 2020s. But just 8% of this summer’s supply is M&A or LBO-related, according to data from 9fin’s market trends tab:

As much as the investors dislike the repricing activity, it’s not loved by the bankers either.

"Repricings don’t really do much for most banks,” one syndicate banker said. “There's not a lot of fee pot in that. The real fees are in absolute new deals, and you're not seeing that many carveouts or pure buyouts.”