A primer brought to you by S & P Global that dissects all aspects of syndicated loans.

Syndicated Loans: The Market and the Mechanics, a primer created for the Loan Market participant.

The U.S. senior secured institutional term loan asset class provides a number of benefits to investors, including a floating-rate coupon, a large and liquid market, lower credit and interest-rate risk than high-yield bonds, and many ways to gain exposure.

Investors in loans like their short duration, high position in the capital structure and their floating-rate attribute that has resulted in better returns than other fixed income instruments. LSTA Executive Director Bram Smith met with four leading loan market participants to discuss the current state of the market, the issues it faces, and how senior loans can enhance institutional portfolios.

The secondary loan market took a step back in July, with prices retreating 34 basis points to an average bid level just north of 98.  In turn, the S&P/LSTA Leveraged Loan Index (LLI) reported a market value loss of 0.35% which drove the total return on the index to negative 0.01%.

As prices pulled back off their highs in July, LSTA secondary loan trading volume dipped 11% to an eight-month low of $62B.

Over the past three decades, the senior loan market has grown  from relatively modest beginnings into an essential element of corporate finance, playing a core-plus role in institutional fixed-income allocations.  In 2018, the S&P/LSTA Leveraged Loan Index, an indicator of market size, surpassed $1 trillion in outstandings.

This presentation is from our second quarter 2021 LSTA Secondary Trading & Settlement Study.  Presented by Ted Basta, LSTA EVP –Analysis & Investor Strategy.

2Q21 LSTA secondary trading volume fell 3% to $202.4B. But 1Q21 was a hard comp to beat; at $209B, it was the second busiest quarter on record (1Q20’s pandemic fueled $249.5B remains the high-water mark).