05 Mar Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. February in Review)
Voya Senior Loan ‘Talking Points’ is a weekly publication from the Voya Senior Loan Team Heads, which provides key insights and results in the Senior Loan marketplace.
Better Tone Lifts Average Bids, Weekly Return
Consistent with the reduction in downside volatility in oil and other capital markets, loans maintained a minor course correction this week. The S&P Leveraged Loan Index rose 0.76%, as the average bid across all loans increased 58 bps, to 89.84.
The mini rally also showed signs of better breadth as the percentage of loans bid above 98 (the current approximate equivalent of par given prevailing average new issue discounts) rose to 42%, up significantly from last week’s 35.8%.
In addition to riding a wave of better overall sentiment, loan prices were buoyed by a moderately better turn in what has been a challenging technical backdrop.
February in Review
Though the loan market ended February on a relative high note, the Index nonetheless lost 0.53% over the course of the month, still a slightly better picture than January’s volatility-driven -0.65% return. February marked the ninth consecutive down monthly return, the longest on record for the asset class.
February’s weak technicals and greater underwriting scrutiny resulting from macro malaise prompted managers to flock to higher rated credits While this is to be expected in bearish markets, the particular focus by CLO managers to minimize CCC/below exposure in order to limit potential harm to collateralization ratios is an indication that credit sensitivity will remain high in the near term, even if oil is truly reaching a bottom.