12 Nov Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. October 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. Contact Breakwater Advisory for more information.
‘Politically Independent’ – Weekly Update
The loan market shrugged off the surprise news of Donald Trump’s victory on Tuesday, US time. After a reflexive dip in trading Wednesday morning in concert with other asset classes, the market had fully recovered by afternoon and finished the week on a solid note. The S&P/LSTA Leveraged Loan Index (the “Index”) returned 0.02%, while the average bid for loans declined by 11 bps, 96.82.
Arrangers set back to work immediately after the election- related drama settled. The secondary market’s activity this week largely mirrored the electoral calendar, with light movements on Monday and Tuesday and a non-reactive stance upon Wednesday morning’s news. Most Healthcare names did slip some, however, due to potential policy changes in that area.
October in Review
After a bustling fall debut the month prior, October demonstrated ongoing high activity for the U.S. loan market. The Index gained 0.83% in October after gaining 0.86% in September. Through October, the Index has returned 8.61% YTD, a striking comparison to the 1.25% YTD return at the same time in 2015 and the best gain for the first nine months of a year since 2009, when the Index was up 46.91%.
We continue to believe that the market value upside for the asset class remains limited in the near term; however the overall coupon remains reasonably attractive, driven by average credit spreads that – while compressing a bit due to repricing activity – remain comfortably above the long-term average, and more than sufficient to offset the reasonably limited default activity that appears to be on the horizon.