May 24, 2022 - April secondary loan trading activity fell 16% to “just” $65.6B, after averaging a near-record $77.4B during the first three months of the year. But even after a quieter April, annualized 2022 trading volume stands at a massive $893.2B, a 14% increase over 2021’s full-year record total. At the same time, market breadth continued to surge higher through April, with more than 1,600 individual loans changing hands across the month. Year-to-date, the number of loans trading monthly has risen 7% to an average of 1,644 loans. In comparison, the number of loans contained within the S&P/LSTA Leveraged Loan Index (LLI) has risen by just 3% to 1,499.
April’s quieter tone in the secondary was mostly attributable to two factors – a busy primary market and a general decline in secondary price volatility. To the first point, managers shifted their “primary’ focus away from the secondary in early April as the LLI reported a $32.5B increase in loans outstanding – by far the highest monthly increase this year. Second, a stronger bid secondary market led to a stabilization of prices and a subsequent lower level of volatility – a trend that quickly subsided during the latter part of April. By the last week of the month, sentiment became overwhelmingly bearish once again as traders finally sold into the relief rally that began in mid-March. To wit, average trade levels fell by more than 100 basis points (to a sub-98 context) during those last five trading sessions while bid-ask spreads remained steady in a mid-to-high 60 basis point range. And that much softer tone bled into the first three weeks of May where LLI monthly returns sank deeply into negative territory at -2.87%, after secondary bid levels tumbled into a sub-95 range.