December 1, 2022 - November was a good month: Loans steadily traded higher along with other asset classes last month, with market value gains on the LLI reaching a three-month best of 0.63%.
October, however, was a bit spottier. On the plus side, volumes were higher. LSTA secondary loan trading volume increased 4% in October, to a four-month high of $70.2B. Though monthly trading volumes averaged just $62B per month across the third quarter, 2022 has seen $706.2B in trading (up 8% year over year) and tracking to an annualized (record) $847.4B. Moreover, the increase in trading (8%) outstrips the increase in the Morningstar/LSTA Leveraged Loan Index (LLI) outstandings (6%).
Despite October’s higher trading activity, monthly market breadth (the number of individual loans traded) declined slightly to 1,500 loans, a figure that still tracks well to the 1,516 loans that reside in the LLI. Pricing stats were mixed: the market’s average trade price increased marginally to 92.5, while the median trade price fell 50 basis points to a 95 level. While one could argue which price metric is more reflective of today’s market, the median does seem most reflective of the market for two reasons. First, 53% of loans contained in the LLI are priced above 95 and second, 54% of October trades (by amount) transacted at a price point above 95. In sticking with the median here, the LSTA/Refinitiv Mark-to-Market bid-ask spread (on the traded universe of loans) remained flat for the fourth consecutive month at 100 basis points. Given November’s rally, we hope to see those medians improve a bit.