OK, it is not quite as grim as some banking lawyers feared at the start of September. The leveraged finance market is creaking back into life, at least compared with the total shutdown of recent weeks. October saw some debt moved on two benchmark leveraged buy-outs (LBOs) – First Data in the US and Alliance Boots in Europe – even if the banks have had to offer a lot of concessions and only move a fraction of the total. But moving again it is, while credit spreads have begun to again narrow both in the corporate bond and money markets, easing the chronic liquidity squeeze that under-pinned the gloom.

As such, deal lawyers are hopeful that the market will bounce back in the new year, or at least get a bit further off the ground.

Not that anyone thinks there will be a quick return to buoyant market conditions with so much debt to be fed into the secondary market. With E80bn (£56bn) of assets that need to be 'unblocked' in Europe alone, it is unsurprising that deal lawyers have revised their expectations as to when the big investment banks will get underwriting again.

There is still plenty of money about – the issue was always one of confidence – and the overall mood is perhaps surprisingly optimistic. The downturn is still being treated by many as a well-deserved break after a relentless couple of years. Some notes of pessimism are still starting to creep in, with one magic circle partner commenting: "There was a lot of downtime in the summer and I am not sure that people are quite so sanguine now."

But despite the slowdown, firms are reporting some substantial deals on the table. Allen & Overy (A&O) and Linklaters, for example, are both looking at new term sheets north of £1bn. Whether or not they stay on the table or come to market is, of course, anyone's guess.

A&O is also advising this month on the financing behind the JP Morgan-led consortium's £4.2bn acquisition of Southern Water from Royal Bank of Scotland. On the borrower side, Kirkland & Ellis reports a number of recent deals in the £400m-£500m bracket.

Think Macquarie, not Ferrovial

As investors flock to lower leverage 'solid' assets, infrastructure has become the hottest area. This seems a bit like a strangely speedy return to the corporate vogue of 2006, indicating that deal markets are taking their cue very much from Macquarie and not at all from Ferrovial, whose acquisition of BAA has not this year garnered many fans. In addition, the booming Middle East and Asian markets continue to see firms' pipelines of deals ticking over.

The market is much more stable than at the turn of the summer, but deal lawyers report that transactions feel 'lumpy'.

A&O's Tim Polglase says: "Doing deals has become more labour-intensive, with more banks involved in each deal and people on both sides of the table being understandably more cautious than they were."

It is obviously a marked contrast to the pre-summer conditions when it seems no hitch could slow down the deals. Linklaters leveraged finance partner Nick Syson warns: "The market will come back at some stage but it will be different and the opportunities will be different. After any big downturn the market morphs into other things and you have to simply morph with it."