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3/23/2020

Weekly Leveraged Loan Market Update

March Madness

  • The secondary loan market continued to free fall last week – LCD’s Flow Name Index recorded the largest weekly decline in the history of the composite with an 880 basis point decrease to 81.33
    • Loan funds recorded a net outflow of $3.4 billion last week, the second largest weekly outflow of all time
      • No new deals launched in the primary market last week
      • Forward calendar sits at just $21.9 billion and is comprised entirely of M&A activity


                      Bottom Line
                      Over the past two weeks, the average bid of LCD’s Flow Name Index has dropped a total of 16.3 points. The Index’s largest two week decline during the Great Recession was just 7.2 points, less than half the decrease seen over the past two weeks.


                      Weekly LoanDex®: A Middle Market Health Gauge

                      Weekly LoanDex Tracker


                      YTD LoanDex® Tracker

                      Weekly LoanDex Tracker

                      LoanDex® Model Drivers

                      Broader Market Sentiment
                      Broader market sentiment links the volatility of macroeconomic indicators, monetary and fiscal policy, and political events to the leveraged loan market. Macroeconomic momentum, in the context of prevailing business cycles, is a key indicator for investor confidence and required security yields. Quantifying systematic risk, especially tail-end risk, is the first step to forecast leverage loan yields and volume trends.

                      Loan Market Technicals
                      Loan market technicals are a snapshot of liquidity based on the current and trailing supply/demand dynamics.  CIT's model factors net loan flows, adjusted new-money volume and other independent variables to quantify surplus / deficit liquidity. Periods of excess liquidity are frequently characterized by eroding credit discipline and tightening clearing yields as investors compete for scarce assets, whereas lenders exercise more influence during periods reflective of constrained market demand. In addition to the current technical equation, CIT monitors the trailing supply/demand relationship to quantify sideline liquidity

                      Loan Market Secondary Support
                      Secondary market volatility influences investor confidence and relative value in the primary market. CIT's model quantifies the secondary market support by tracking secondary loan price movement with an emphasis on normalized deviation metrics. 

                       

                      Disclaimer: The information contained herein has been compiled from a variety of sources believed to be reliable.  We do not guarantee such information or make any representation as to its accuracy.  This publication is intended to provide general information regarding capital markets and financing matters and is not intended nor should it be construed, to provide legal, accounting or financial advice.

                      Source: S&P's Leveraged Commentary & Data, Thomson Reuters LPC, Bloomberg, Capital IQ, Moody's, S&P Credit Portal

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