November was a solid month in the secondary loan market, with S&P/LSTA Leveraged Loan Index (LLI) returning 0.59%. October, however, was a different story. Secondary loan trading volume spiked 19% in October to a six-month high of $64 billion. This followed a two-month stretch where volumes fell below $60 billion per month.
For the second time in three months, loan returns were negative in the loan market. After returning 0.47% in September, the S&P/LSTA Leveraged Loan Index (LLI) produced a 0.43% loss in October –the worst monthly print this year.
After returning more than 4% during the two-month rally that began the year, the S&P/LSTA Leveraged Loan Index (LLI) has failed to sustain any meaningful momentum. Since March, monthly returns have flipped from positive to negative while market value returns were positive just twice – the last time being July. In September, despite market value losses that were negative yet again (albeit at just -0.02%), the LLI sported a total return of 0.47%.
Last month we highlighted that secondary loan prices finally caught a bid in July, following two consecutive months in the red. Well, the rally proved to be short lived as the secondary loan market generated its worst reading of the year in August. The average bid level on the S&P/LSTA Leveraged Loan Index (LLI) decreased 72 basis points, to a six-month low of 96.34. The move lower pushed the August LLI return to an eight-month worst of -0.27%. Market value returns (-0.78% in August) have now been negative for the third time in four months. To be fair, Index year-to-date returns remain a robust 6.58%.
Last month we highlighted that secondary loan prices finally caught a bid in July, following two consecutive months in the red. Well, the rally proved to be short lived as the secondary loan market generated its worst reading of the year in August.
Following two consecutive months in the red, secondary loan market prices finally caught a bid in July. As a result, the average bid level on the S&P/LSTA Leveraged Loan Index (LLI) increased 27 basis points, to 97.06. The move higher pushed the July LLI return to a three-month best of 0.8% as market value returns (0.29%) were positive for just the second time in five months. The Index had returned 6.6% through month-end July, but prices have since softened following an “insurance policy” rate cut by the Federal Reserve and an intensified trade war with China. But while the Dow plunged 760 points on Monday, loans slid just 10 basis points.
While markets can turn on a dime, they can also turn on a tweet. President Trump tweeted on Sunday that starting this Friday the US would increase current, and apply new tariffs on Chinese goods if a trade deal could not be reached.
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.