03 Oct Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. September 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.
Pass the Dramamine, Please
Rough seas in equities and the high yield bond market continued to spray over the loan market, as the S&P/LSTA Leveraged Loan Index returned -0.53% during the week. The average Index bid price declined 58 bps, to 94.15.
Despite the chop, activity in the new issue market held steady. The real story, however, is not what the forward calendar holds, but the time with which it may take to move through the market.
BB loans are continuing to outperform the broad Index, though not as dramatically last week, with a return of -0.42%. A function of being the largest and often most traded part of the Index, single Bs trailed the broad Index with a return of -0.57%, while CCCs continue their fall from favor at -1.02%.
September in Review
Facing a choppy technical environment amid highly volatile conditions across almost all traditional capital markets, the S&P/LSTA Leveraged Loan Index (“Index”) lost 65 bps for September, bringing the YTD return down to 1.44%.
Importantly, although loans have slipped into the red recently from an absolute return perspective, they continue to hold up better than most of the other major asset classes. The BAML High Yield Master Index lost 2.59% for the month, and the S&P 500 Index was down 2.47%.
Looking ahead, bifurcation in both the secondary market and the primary market are expected to persist in line with overall market volatility. The divergence seen in September, particularly in the secondary market, was a result not only of general instability, but of the different motivations behind investors.