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Japanese banks might have snapped up a third of the loans made to highly indebted U.S. companies, propelling the size of the market past $1 trillion, a new estimate from UBS Group AG suggests.

Years of low yields spurred investors to pour money into leveraged loans — credit extended to companies with the weakest balance sheets. Such assets were pitched as a haven for those worried about the prospect of rising interest rates, and were often repackaged into so-called collateralized loan obligations (CLOs) with credit enhancements to protect investors.

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