February 14, 2019 - Talk about starting the year off with a bang. Secondary loan trading volumes increased 9% in January to $76.1 billion as prices rebounded in the secondary and the S&P/LSTA Leveraged Loan Index (LLI) returned a whopping 2.55%. January marked the second time in the last three months that trading activity hit a fresh all-time high – the other being November at $74.9 billion. And across the previous three months, market breadth remained robust with an average of 1,465 individual loans traded per month. Furthermore, the market’s annualized turn-over ratio (trading volumes divided by average LLI outstandings) increased eight percentage points over the same time period, to 78%, from full-year 2018’s reading of 70%.
As market participants are aware, higher trading volumes have been attributed to the recent bout of price volatility in the secondary market that resulted in loans trading outside of their previous two-plus year range. To that point, prices began softening in the secondary back in November of last year when the median trade price fell below par for the first time since August 2016. The median trade price went on to bottom out at 97.3 by year-end before rallying back to 98.15 in January. In turn, the median “LSTA/Refinitiv Mark-to-Market” bid-ask spread (on the traded universe of loans) widened above 90 basis points in December but only tightened marginally in January – to a mid-80 basis point context.
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