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Loan Trading Volumes Hit 15-Month High in May

June 21, 2018 - U.S. secondary loan trading volume increased a staggering 20% in May to a 15-month high of $63.6 billion.  The sharp rise in activity was driven by a $21 billion surge in S&P/LSTA Leveraged Loan Index (LLI) Outstandings, which now sit north of $1.03 trillion.  Across 2018, the LLI has experienced a 7% rise in both outstandings (+$69 billion) and facility count (+86 loans).  Today, the index is tracking a record 1,261 loans.  But while the LLI has expanded in size, year-to-date trading volumes ($281 billion) are actually down 3% from the same period last year ($290 billion).  To be fair, the comp is tough: first quarter 2017 did set a record at $181.6.  That said, monthly market breadth or the number of loans traded, has illustrated a deeper secondary market this year as the number of loans trading monthly is now approaching 1,500. This is materially above last year’s monthly average of 1,406.       

While trading volumes have been solid in 2018, some traders have commented that volumes could have actually been much higher if it wasn’t for the lack of volatility in the market.  As an example, the median trade price has remained at or above 100 for the past 21 months – although it did slip one-eighth to 100.125 in May as the secondary softened a bit.  Furthermore, the average trade price during May was down five basis points to an eight month low of 98.05.  This is a very modest decline considering that just 18% of loans reported market value gains during May while 67% reported losses.  And as prices declined, mostly on the high end of the market, the median LSTA/Thomson Reuters Mark-to-Market bid-ask spread on the traded universe of loans widened 3 basis points from April’s post-credit crisis low of 47 basis points.

LSTA Full and Associate Members can access the full Summary, including charts, here.  For more information, please contact Ted Basta.

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