This tour draws heavily on work conducted by the Federal Reserve staff as part of our ongoing quantitative surveillance efforts, under the auspices of our Office of Financial Stability Policy and Research. The first stop on the tour is the market for leveraged finance, encompassing both the public junk bond market and the syndicated leveraged loan market.
As can be seen in exhibit 2, issuance in both of these markets has been very robust of late, with junk bond issuance setting a new record in 2012. In terms of the variables that could be informative about the extent of market overheating, the picture is mixed.