Bond sales could lead to large changes in bond prices and overall financial conditions if technological, market, or regulatory factors contribute to strains on market liquidity--a possibility that has been relatively untested over the course of the expansion. -7Further down the credit quality ladder, there has been sizable growth in leveraged lending, accompanied by a notable deterioration in underwriting standards.
Net issuance of debt to risky borrowers, which had stopped growing in late 2016, rebounded over the past year. Leveraged loans outstanding rose about 12 percent over the past 12 months and now stand around $ trillion overall. 4 While leveraged loans have traditionally had important investor protections, loan covenants for new leveraged loans have weakened dramatically.