December 17, 2020 - LSTA secondary loan trading volume decreased 15% in November, to a four-month low $52.6B. Interestingly, volumes had risen 19% in September to a then four-month high $60.4B.
Through November, year-to-date volumes now total a record $720B, 4% higher than the same period last year. The caveat here, of course is that during the market’s swift downturn during March, volumes amounted to a staggering $119.3B or 17% of the year-to-date total. That said, total trading activity over the first 11 months of this year is just $23B shy of last year’s record $743B.
While trade activity fell in November, loan prices rallied after pulling back in October from their post-February highs. Loans were not alone in the rally as risk assets broadly delivered impressive November returns as news broke that a COVID-19 vaccine would soon be available in the United States. While equities posted massive double-digit November gains, the S&P/LSTA Leveraged Loan Index (LLI) returned a six-month best of 2.23%. Loan trading levels increased across the lion’s share of the secondary with 87% of loan prices advancing and just 6% declining. November’s advancer/decliner ratio of 15:1 was the most bullish ratio recorded this year. All told, the average trade price increased 0.8%, or 79 bps, to 96.15 – a nine-month high. The median trade price also increased to a post-February high, increasing 25 bps to a 98.25-handle. The market’s average and median bid levels remain 150 bps shy of their 2020 high watermarks which were also established back in February.
Back to November trading stats, where 55% of trades printed at a price between 98 and 100, with an additional 4% of trades occurring above par (one-third of loans were trading above par back in February). At the same time, LSTA/Refinitiv mark-to-market bid-ask spreads on the traded universe of loans continued to tighten marginally as three bps were shaved from both their average and median levels. These ended November at 99 bps and 81 bps, respectively. Both figures are now in earshot of their February tights, which were reported at 78 bps and 63 bps, respectively. The lion’s share of loans (58%) now trade at a bid-ask spread between 51-100 bps as compared to just 21% during the market downturn in March. Even still, the secondary market remains relatively well bid – a trend that strengthened in December as prices moved higher and LLI year-to-date returns continued to march higher into a 2% context.