May 25, 2023 - LSTA Secondary loan trading volume dropped 26% to just $58B in April, after rising to a 10-month high $78B in March.  Driving April volumes lower was a substantial fall-off in market breadth, where the number of distinct loans traded fell to 1,428, after averaging north of 1,500 loans across the first quarter.  April secondary activity not only represented a four-month low but also just the second sub-$60B reading in nine months (the other being a seasonally quiet December). April also marked the first time in 13 months where total trading volume fell below $800B over the rolling last twelve-month (LTM) period.  In comparison, the LTM figure hit an all-time high of $830B in October and has been in decline ever since. 

Year-to-date (YTD), secondary volume stands at $269B, down 10% from the same time last year.  Not so surprising given that the broadly syndicated loan market has been shrinking while visible demand levels have been declining.  Case in point, Morningstar/LSTA Leveraged Loan Index (LLI) outstandings ended April just shy of $1.4T; 1% lower YTD and 2% shy of their all-time high during September.  Additionally, YTD CLO issuance is off 12%, to $40B, from the same time last year while loan mutual funds and ETFs have reported YTD outflows of $13.5B.  That last figure balloons to $51.5B since flows first started running negative back in May of 2022.

Turning back to the April secondary where market breadth turned bullish once more – with two-thirds of loan prices advancing and just 27% declining.  This was a complete reversal from March when 65% of prices declined and 29% advanced.  In turn, the April median trade price rallied 50 basis points to a 98-handle while the market’s median “mark-to-market” bid-ask spread tightened eight basis points, to a 12-month low 80 basis points.  And as bids strengthened across April, the percentage of trade activity at a price point of 98 or higher increased five percentage points to 55%, but that figure still trails February’s 57% share.  But as readers are aware, the secondary market has lacked direction this year and remains bifurcated with 16% of April activity remaining in a sub-90 bid range. But again, this all occurred on very little trade volume.  LSTA members can access more secondary trading data & analysis, here.

Become a Member

Membership in the LSTA offers numerous benefits and opportunities. Chief among them is the opportunity to participate in the decision making process that ultimately establishes loan market standards, develops market practices, and influences the market’s direction.

View Current Members

Our Partners

CUSIPDeal Catalyst transparent colourFitch Group logolseg_da_logo_hrz_rgb_posMorningstar