February 20, 2025 - In looking back to last year, LSTA annual secondary trading volumes came in just $3 billion short of 2022’s record $824 billion, after averaging $68.5 billion per month in activity.  In January, secondary volumes remained elevated at $69.2 billion, slightly ahead of the LTM average and 5% higher than the same time last year.  While volumes trended higher in the secondary, the size of the broader market contracted once again in January as Morningstar/LSTA Leveraged Loan Index (LLI) outstandings shrank by more than $9 billion (after accounting for paydowns). According to LSEG, primary market deal flow continued to be dominated by refinancing activity where just 8%, or $12.8 billion, of January institutional deal flow represented new money loans. At the same time, average new issue clearing yields tightened for a third consecutive month, to 7.3%.  January’s reading came in as the tightest monthly average print since May of 2022.

Back to the secondary market, where January price action was mixed as the hunt for yield sent traders to bid up lower priced/higher yielding loans.  As an example, the cohort of loans trading in a sub-80 range, which accounted for 5% of overall trading activity and just 3% of total outstandings, rallied 170 basis points to a mid-60s context.  This trend was supported by a strong bid for CCC rated loans, where market value returns ran positive for the first time in eight months, according to the LLI.  Conversely, the cohort of loans trading 98 or better, which represented 75% of trading activity but 82% of total outstandings, traded off 10 basis points but still sported an average trade price north of par.  Breaking that down even further, we also witnessed a decline in trading activity (relative to outstandings) in the par and above segment of the secondary, which represented 59% of trading activity but 66% of total outstandings.  That all said, the broader traded universe of loans, which totaled more than 1,600 individual loans in January, reported a 14- basis point decline in its median trade price, after hitting a near-seven year high of 100.19 in December.