As we begin the fourth quarter, there has been a tremendous amount of investor focus on the uncertainty of the US macroeconomic backdrop and its implication for the senior secured bank loan market, potential defaults rates, and potential sustained volatility. Paramount among those concerns are three key questions:
1) How are underlying issuer able to handle inflation pressures and will they be able to pass along increased costs to their consumers?
2) How will the rising interest rate cycle affect issuers and, more important, their ability to service debt?
3) What effect will a potential recession have on issuers?
This note attempts to answer these questions, along with providing Invesco’s view of the current market
environment.
