Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Stay on top of the latest market trends

Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!
Expand chart
Data: LCD, S&P Global Market Intelligence; Chart: Andrew Witherspoon/Axios

The weakening credit quality in loans continues and is even picking up steam, data from S&P Global shows.

Why it matters: So-called covenant-lite loans account for nearly all leveraged loans originated in Europe so far this year and 85% of those issued in the U.S. in 2018.

What it means: The loans are called covenant-lite because they lack traditional loan requirements and offer less protection for lenders and investors than traditionally structured credits if borrowers default.

  • The loan structures were largely unheard of prior to 2010, being used in just 5% of U.S. loan originations, and not used in Europe at all until 2012.
  • "To me it's a late cycle indicator," said David Lebovitz, Global Market Strategist at JPMorgan Wednesday. "If you are a borrower and you are able to walk in and dictate the terms of your loan, basically have very few protections for the lender, you have to be in a pretty tight environment."
  • The loans are typically not held on bank balance sheets, helping the banks look healthier and less risky. However, the banks are largely just passing those risks on to asset managers and private equity firms.

The big picture: Not only are covenant-lite loans growing in the share of new loans issued, as of February their share of all outstanding leveraged loans reached 82% in Europe and 79% in the U.S. There is currently $928 billion of covenant-lite debt outstanding in the U.S. and 148 million euros worth in Europe.

  • "As a borrower, it's a great time. We don't need covenants on anything anymore. We want to buy a building, build a building, we can borrow as much as we want at the terms we want. It's great. The last thing I want is to be the guy who provides that funding on the other side," said JPMorgan Global Alternatives Managing Partner Anton Pil.
  • Yes, but: "This will end poorly. It's just a question of when," Pil added.

Go deeper

Bryan Walsh, author of Future
1 hour ago - Health

Why we need to know COVID's origins

The WHO's headquarters in Geneva. Photo: Fabrice Coffrini/AFP via Getty Images

Geopolitical tensions are foiling efforts to get to the bottom of how COVID-19 originated.

Why it matters: Insights into how COVID-19 began can help us prevent future pandemics — especially if it involved any kind of leak or accident at a virology lab.

Updated 4 hours ago - Politics & Policy

Senate pulls all-nighter on amendments to COVID relief package

Photo: Alex Wong/Getty Images

Democratic leaders struck an agreement with Sen. Joe Manchin (D-W.V.) on emergency unemployment insurance late Friday, clearing the way for Senate action on President Biden's $1.9 trillion stimulus package to resume after an hours-long delay.

The state of play: The Senate continued to work through votes on a marathon of amendments overnight into Saturday morning.