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Loan Market Snapshot - February 2017

16 February 2017 | Invesco Senior Secured Loans team

The US loan market (Credit Suisse Leveraged Loan Index in USD) began the year on a steady note, returning 0.56% in January.

Re-pricing activity dominated the loan market throughout the month as issuers continued to capitalise on strong demand for assets as an opportunity to lower spreads. The US$67 billion of re-pricing volume during the month brought the six month total to US$167 billion. Despite the wave of re-pricings and a more restrained risk appetite across markets amid the transfer of power in Washington, loans delivered solid returns underpinned by strong coupon income and firm prices.

Loans again outperformed long duration assets as cues from both Federal Reserve chairwoman Janet Yellen and the Trump administration continued pointing to a period of higher interest rates on the horizon.  As cash continued to flow into the loan market, the lower yielding, higher quality BB (0.14%) and B (0.54%) ratings categories were outpaced by the CCCs (3.32%) and Ds (3.80%) as has been the case in recent months. From an industry perspective, the two performance outliers were energy (5.95%) and retailers (-0.73%). The average price in the loan market was US$98.39 at the end of January with 68% of the market trading at or above par. At the current average price, senior secured loans are providing a 5.93% yield.

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Tags: Fixed income