The Cost of Hedging in the High Interest Rate Environment

It's estimated that about two thirds of the $1.4 trillion leveraged loan market was unhedged at the end of 2021, after which hedging costs skyrocketed. "Many had not contemplated an environment like we had seen in the 70s or 80s with interest rates so high," he says. Even if companies don't have near-termaturities that might force a default, they can absolutely run into liquidity issues as they seek to service this growing debt burden.