05 Dec Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. November 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.
A Little Warmth Following November Chill
The Index” returned a flat 0.00% for the week, with a modest decrease in the average bid price of 5 bps (to 92.59).
The primary market was busy launching 17 deals this week – likely the last hurrah before the typical holiday slowdown later this month. There are some signs that the balance of influence between issuers and investors is evening some – for one, if we look at deals in November versus October, the gap between the number of deals for which the credit spread was flexed up vs. flexing down has narrowed.
The secondary market also saw improvements. While traders worked through a round of portfolio bids and offers (“BWIC” and “OWIC”, respectively) in a market still very much divided on quality, market technicals did benefit from a large paydown of one loan.
Improved market conditions helped lift the volatile CCC cohort to a return of 0.14% for the week, while BB loans benefited from a continued quality bias, outperforming the Broad Index with a return of 0.07%. Single B loans trailed at -0.06%, primarily a function of being the largest, most actively traded part of the market in a week with higher BWIC/OWIC activity.
November in Review
November was a chilly month for the loan market, as the Index posted a -0.88% return. The YTD number remains in the black at 0.37%, a result of interest accruals which have just outpaced a 3.90% market value decline for the Index YTD. The weighted average price of loans stood at 92.63 as of the end of November, weighed upon heavily – not surprisingly – by the stressed/distressed sectors within the Index.
In addition to sector-specific credit sensitivity, returns continue to be hampered by market technicals – specifically, strong supply against slowing demand. It remains to be seen what a potential lift in short-term rates by the Fed this month could do for the loan market in terms of spurring interest in floating rate alternatives. From a fundamental perspective, default activity continues to remain low and, setting aside a relatively smallish exposure to the direct oil/gas space, is expected to remain that way over the foreseeable horizon.