June 2013, US Leveraged Loan Market Analysis

Through the first three weeks of May, the loan-market’s virtually uninterrupted 2013 rally persisted. During the final week of the month, however, loan prices eased about a quarter point. On the whole, the loan market remains resilient. Looking ahead, participants expect tone in the HY market to remain a key driver of loan market conditions.

Welcome to sp capital iq’s monthly loan market update i’m steve miller a member of the leverage commentary and data team over the next few minutes we’ll review recent market trends in preview the loan market stumbled slightly in late may as a result of selling pressure and a pickup in supply through the first three weeks of may the loan markets virtually

Uninterruptedly persisted during the final week of the month however loan prices eased about a quarter point the reason was twofold for one thing hi bata names came under selling pressure from high-yield accounts seeking to build cash in the teeth of outflows for another an increase in loan supply help soak up some of the excess liquidity that has long kept

Prices aloft thus after generating a point five percent return during the first 22 days of may the spl sta index lost point 3 1 percent during the final nine days of the month all told then the index eked out a point one nine percent gain in may the smallest monthly advance in a year still with a 10-year treasury yield up about 50 basis points in may loans handily

Outperformed fixed income products with clo issuance still curtailed in may visible inflows again fell short of the first quarter sky high levels in all investors put ten point seven billion dollars to work in the asset class in may including 4.9 billion dollars of new clo prints and 5.8 billion dollars in retail mutual fund subscriptions based on data from lipper

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Fm i on the other side of the technical ledger the amount of spl sta index loans outstanding increased by 5.5 billion dollars in may but that was only the start owing to a slew of large m&a driven executions in recent months the backlog of new money loans that have allocated but not yet funded into the index to the 33 billion dollars by the end of may putting

Further pressure on loan prices the impact of the markets late may swoon was felt mainly in the secondary in the primary market by contrast clearing yields were largely stable with bb loans printing in a three to three-and-a-half percent band and single bees in a five percent context that said managers were able to push back against some of the more aggressive

Transactions that launched in late may and early june dividend financing was a major source of primary product in may indeed the amount of dividends financed by leveraged loans pushed to a record seven billion dollars during the month turning to credit conditions the default rate retreated to 1.4 percent in may from one point nine percent in april and a 28-month

High of 2.2% in march managers are constructive on the near-term outlook on average they expect the rate to tick up to 1.8 percent or so by december according to lcds latest by side poll taken in mid-march on the whole the loan market has been resilient bolstered by inflows from retail and institutional investors looking to loans as a way to hedge against rising

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Rates as a result new issue clearing yields have moved up only marginally in recent weeks looking ahead participants expect tone in the high-yield market to remain a key driver of loan market conditions that brings us to the end of our overview for more information on the loan market can check in with us on the web or via linkedin twitter or facebook the links

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June 2013, US Leveraged Loan Market Analysis By LCDcomps