Monthly US Loan Market Update - November 2017

Nov 15, 2017 | Invesco Fixed Income

Senior secured loans returned 0.60% in October and 3.59% year-to-date1. Gains were driven by the impact of encouraging macroeconomic data, healthy corporate earnings, and firming energy prices, as well as the resurgence of investor focus on rate risks. These factors contributed to demand for loans, and fueled outperformance versus longer duration assets.

Meanwhile, after a more active month for new issuance in September, the loan market returned to being short on new supply in October as it has been for much of the year. Gross supply in October grew sequentially to $65.9 billion, however this was due to accelerated repricing activity. The $23.9 billion of net new supply in October was similar to September levels, but did not blunt the loan price tailwind coming from firmer demand. During the quarter, the percentage of loans trading above par rose to 74.4%.

Loans outperformed other fixed income credit markets in October, with the High Yield Bond Index returning 0.39% and the High Grade Bond Index returning 0.40%2. The 10 year Treasury fell 0.23% as yields rose 5 basis points to 2.38%. Loans’ lower yielding, higher quality “BB” (0.55%) and “B ” (0.60%) ratings categories lagged the performance of “CCC’s” (1.72%)3. The average price in the loan market was $97.98 at the end of October4. At the current average price, senior secured loans are providing a 6.00% yield5.  

 

1 S&P/LSTA Leveraged Loan Index October 31, 2017
2 BAML High Grade Corporate Bond Index, BAML HY Master Index October 31, 2017
3 S&P/ LCD October 31, 2017
4 S&P LCD October 31, 2017
5 S&P LCD and Invesco as of October 31, 2017

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