The European high-yield bond and leveraged loan markets had a blockbuster first half but face challenges ahead as a substantial repricing of credit takes hold and investor demand for junk rated debt drops off, according to new research.

Combined leveraged loan and high yield bond issuance increased 12.2.% to €151bn ($205bn) at the end of June compared with the first six months of last year, according to a quarterly report from industry trade bodies The European High Yield Association and Securities Industry and Financial Markets Association.