What the leveraged loan market can tell us about the software sell-off
Financial Times
February 23, 2026
AI-Generated Deep Dive Summary
The leveraged loan market has emerged as a key indicator of broader economic health, offering insights into the risks and uncertainties facing businesses and investors. In recent months, the market has shown signs of strain, with declining demand for leveraged loans, particularly in the tech sector, signaling a potential shift in investor sentiment. This sell-off has coincided with heightened concerns about inflation, rising interest rates, and the impact of geopolitical tensions on global markets.
One of the key factors driving this trend is the growing skepticism among investors about the valuations of high-growth companies, especially those in the software industry. Many of these firms have relied heavily on leveraged loans to fund their rapid expansion, but as lenders become more cautious, access to capital has tightened. This dynamic has led to a reevaluation of risk and return profiles, with investors demanding higher yields to compensate for perceived risks.
The sell-off in the software sector has also been influenced by broader macroeconomic factors, including the Federal Reserve's aggressive interest rate hikes. These measures have increased borrowing costs, making it more expensive for companies to service their debt. Additionally, the shift toward more conservative lending practices by banks and other financial institutions has further constrained access to credit.
For businesses and investors alike, understanding the state of the leveraged loan market is crucial. It provides valuable insights into the health of the corporate sector, particularly in high-growth industries like tech. While the current environment presents challenges, it also offers opportunities for those who can navigate the landscape effectively. As the market evolves, keeping a close watch on these trends will be essential for making informed
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Originally published on Financial Times on 2/23/2026