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12/10/2018

Weekly Leveraged Loan Market Update

Real Estate
Insights

Year-End Slide

  • Alongside last week’s equity sell-off, the loan market continued to experience turbulence
    • The average LCD Flow Name Index bid fell 26 bps to 97.98, marking its seventh straight week of decline
    • For the first time in four years, loan funds have had three consecutive weeks of outflows over $1.0 billion
    • Consequently, the loan market continues to become more investor friendly, with 6 of 11 deals in market flexing pricing last week
      • Notably, large transactions for Atlantic Aviation, Dealer Tire, and XOJET all widened pricing


    CIT Bottom Line
    The volatility seen in the broader markets continues to play a role in recent loan market instability. 


    CIT Weekly LoanDex®: A Middle Market Health Gauge

    Weekly LoanDex 11.5

    YTD LoanDex® Tracker

    Weekly LoanDex Tracker 11.5

    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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