- Senior loans were on more solid footing this week, as the S&P/LSTA Leveraged Loan Index (the “Index”) returned 0.10% for the seven-day period ended August 12, while the average Index bid price moved up two bps to 97.99. On a YTD basis, the Index is up 3.37%.
- The primary market remained active this week with arrangers hoping to wrap up deals ahead of the expected late-summer slowdown. Supply was titled in favor of refinancing transactions, which represented the bulk of the deal flow. In the forward pipeline, the amount of new supply expected to enter the market (net of anticipated repayments) contracted relative to the last estimate ($3.1 billion vs. $8.0 billion).
- Issuer earnings continued to trickle in this week, although the pace of reporting is expected to slow down over the coming weeks. A handful of companies saw their loan price tick up in the secondary market on the back of positive results.
- Turning to investor demand, retail loan funds experienced $423 million of inflows for the five business days ended August 11 according to Lipper. In the CLO space, managers printed four new deals, pushing the YTD tally to $98 billion.
- There was one default in the Index this week (Glass Mountain Pipeline), and the first since February of this year. As a result, the trailing default rate moved slightly higher but remains comfortably below the historical market average.
Source: S&P/LCD, S&P/LSTA Leveraged Loan Index and S&P Global Market Intelligence. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index.
Unless otherwise noted, the source for all data in this report is Standard & Poor’s/LCD. S&P/LCD does not make any representations or warranties as to the completeness, accuracy or sufficiency of the data in this report.
1. Assumes 3 Year Maturity. Three-year maturity assumption: (i) all loans pay off at par in 3 years, (ii) discount from par is amortized evenly over the 3 years as additional spread, and (iii) no other principal payments during the 3 years. Discounted spread is calculated based upon the current bid price, not on par. Please note that Index yield data is only available on a lagging basis, thus the data demonstrated is as of August 6, 2021.
2. Excludes facilities that are currently in default.
3. Comprises all loans, including those not tracked in the LPC mark-to-market service. Vast majority are institutional tranches. Issuer default rate is calculated as the number of defaults over the last twelve months divided by the number of issuers in the Index at the beginning of the twelve-month period. Principal default rate is calculated as the amount defaulted over the last twelve months divided by the amount outstanding at the beginning of the twelve-month period.
General Risks for Floating Rate Senior Loans: Floating rate senior loans involve certain risks. Below investment grade assets carry a higher than normal risk that borrowers may default in the timely payment of principal and interest on their loans, which would likely cause the value of the investment to decrease. Changes in short-term market interest rates will directly affect the yield on investments in floating rate senior loans. If such rates fall, the investment’s yield will also fall. If interest rate spreads on loans decline in general, the yield on such loans will fall and the value of such loans may decrease. When short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on senior loans, the impact of rising rates will be delayed to the extent of such lag. Because of the limited secondary market for floating rate senior loans, the ability to sell these loans in a timely fashion and/or at a favorable price may be limited. An increase or decrease in the demand for loans may adversely affect the loans.
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Past performance is no guarantee of future results.