Leveraged loans shelter the storm better than equities and bonds
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The post-FOMC1 statements by Fed Chairman Ben Bernanke sent markets down as investors priced in the tapering of quantitative easing. The high bond market froze, yet the leveraged loan market remained open.
Last week, there were no bonds priced after Wednesday, though leveraged loans continued business as usual. As investors fled high yield bonds, leveraged loans continued to price, though with more issuer friendly changes.
Issuance remains strong
A total of 20 deals priced last week, half of which priced on Thursday and Friday. There were even opportunistic refinancings that priced tightly, though investor push back led to two transactions being pulled.
While the market was pushing back more than in previous weeks, most issuers offered improved terms to appease the investors. In contrast, the high yield market priced seven deals all before Thursday.
Loans remain attractive
Loan issuance remains far ahead from last year. Year-to-date issuance is now over $353 billion, in comparison to $200 billion of the same period last year. The search for yield and interest rate risk aversion will likely keep investors interested in leveraged loans in the short-term.
- Federal Open Market Committee ↩