Return of leverage: But is it different this time?
The amount of leveraged loans being issued to companies has hit an all-time high in 2013, raising concerns that companies are rushing to take on too much debt.
There are also concerns that the hard lessons of the financial crisis -- including the collapse of Lehman Brothers, which was partly caused by its high leverage -- have not been learnt.
U.S. leveraged institutional loan volume is $392.5 billion in 2013 so far, nearly double the volume syndicated by the same time in 2012, and the highest volume on record for this time of year, according to figures from Dealogic.
And the rush to leverage is overwhelmingly U.S. based, see below:
"While US firms are already engaging in M&A and LBO [mergers and acquisition and leveraged buy-out] activity, European corporates remain very conservative, mindful of the risks of lower ratings. But with positive growth in 2014, releveraging risk could gradually come to Europe, too," according to RBS credit analysts.
However, if the shutdown of parts of the U.S. government continues or -- even worse -- the U.S. government ends up defaulting on its debt payments, this could all change very rapidly.
There are "signs of frothiness" in US credit markets already, RBS credit analysts warned.
(Read more: Bob Diamond admits leverage was too high)
Leveraged loans typically carry a higher risk of default, and therefore are usually more expensive for companies to take on. However, they are easier to pay off in a low-interest rate environment.
Banks in particular have faced tighter controls on their leverage ratios post-credit crisis. In Europe, one of the key points of the Basel III regulations, which will be fully implemented in 2018 is that most banks have to get below a leverage ratio of 3 percent – that level goes up to up to 6 percent for the banks judged most important for the economy.
The high level of recent loans may partly be accounted for by a round of big deals like Verizon's raising of over $60 billion to fund its buyout of Vodafone from their Verizon Wireless joint venture, which made the telecoms giant the single-largest issuer of outstanding corporate debt.
(Read more: Largest-ever loan for Verizon deal)
These deals were easier to do when there were fewer worries about the state of the economy – and some may even have been on hold while crises like the euro zone debt crisis seemed to be at their peak.
And this pattern may not continue at such a pace for the rest of the year – the institutional leveraged loan forward calendar is down to $28.7 billion at October 3, from $43 billion on September 12.
The U.S. Federal Reserve has helped keep the cost of leverage low by maintaining low interest rates and its asset purchasing program. With the threat of a gradual end or "taper" to the program in September (which failed to materialize), banks rushed to complete deals. While the taper did not appear, there are still concerns that the current relatively cheap debt cannot continue for too long.
And when it stops, there may be trouble ahead.
- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.