October 20, 2016 - October 20, 2016 – U.S. secondary loan trading volumes fell 12% during the third quarter to $141 billion. This is not a big surprise given the seasonality of third quarter activity (over the past five years, volumes, on average, fell more than 10%). Moreover, last quarter’s $160.1 billion in activity represented a two-year high. That said, following a slow July and August, trading volumes spiked 22% in September to $54.2 billion. With nine months in the books, trade activity is basically flat year-over-year. But this may actually suggest improved liquidity. Traders note that flat trading comes amid lower levels of new supply and demand: the S&P/LSTA Leveraged Loan Index (LLI) is smaller by roughly $20 billion this year, while CLO issuance is down $30 billion. The big story of 2016, however, centers on the V-shaped recovery in secondary market prices, which have driven returns to four-year highs. After bottoming out at a multi-year low in February, the average trade price has rallied 555 basis point to a 22-month high of 96.73. At the same time, the median trade price has once again hit par (for the first time in 15 months) after rising 375 basis points off its February low. This price rally has brought LLI returns well above 8% on the year.
For more expansive coverage, please join Ted Basta on October 27th, at 4PM (ET), where he will present LSTA 3Q16 Secondary Trading & Settlement Study results and discuss the secondary market’s V-shaped recovery in greater detail. Full and Associate members can Click here to Register for next week’s Webcast.