Leveraged Loans Funds Witness Outflows for Tenth Successive Week
Leveraged loans funds saw outflows for the week ended September 30 for the tenth successive week. With outflows for the week ended October 2, YTD outflows are $9.9 billion.
The US leveraged loans market saw an allocation of $68.1 billion worth of senior loans in 3Q15. This was 59.9% lower than the $170 billion in 2Q15 and higher than issuance in 1Q15.
The US leveraged loans market saw an allocation of $12.1 billion worth of senior loans in September 2015. This was 55.7% lower than the $27.4 billion priced in August 2015.
The US leveraged loans market saw an allocation of $1.9 billion worth of senior loans in the week ended October 2. This was 73.5% lower than the $7.2 billion in the week ended September 25.
Net outflows from high-yield bond funds totaled $2.2 billion in the week ended September 30, compared to inflows of $17.7 million in the previous week. The outflows were the largest in 13 weeks.
Junk bond issuance was subdued in 3Q15 except for the week ended September 25. Volatility in financial markets and worries about a slowdown in the global economy kept issuers away from primary markets.
High-yield bond issuance fell in 3Q15 compared to 2Q15, with July and August seeing muted issuance activity. Both of these months saw the least issuance in 2015 year-to-date.
Frontier Communications (FTR) issued junk bonds worth $6.6 billion on September 11. This was the fifth largest issue ever.
In high-yield bond markets, there was no issuance of high-yield debt in the week ended October 2, 2015. It was the first week since early 2009 when no deals were launched or priced.
Equities in the United States rose for most of the week ended October 2 ahead of the non-farm payrolls report for September. They rose in hopes that moderately strong job additions would continue.
Adding bonds across credit classes helps diversify your bond portfolio. The weight of each category depends on your risk appetite and the business cycle.
A 2% federal funds rate could certainly affect stock and bond prices. They would start to tumble almost instantly.
At a micro level, low-cost credit encourages spending and discourages saving. In the long term, a low-interest rate regime penalizes savers.
Leveraged loans funds saw the ninth straight week of outflows for the week ended September 23. The outflows totaled $257.6 million, compared to net outflows of $350.4 million in the previous week.
The US leveraged loans market saw a $7.2 billion allocation of senior loans in the week ended September 25—nearly double the $3.8 billion priced in the week ended September 18.
According to Lipper, net inflows into high yield bond funds totaled $17.7 million in the week ended September 23, compared to inflows of $236.4 million in the previous week.
Altice N.V. issued $4.8 billion in junk bonds on September 25 in a three-tranche issue. The same day, Olin Corp. issued $1.22 billion in junk bonds in two tranches.
Dollar-denominated high yield debt of $10.01 billion was issued in the week ended September 25—up by an astounding 926.7% from the previous week’s $0.975 billion in issuance volume.
All three US equity indices that we review in this weekly series fell in the week ended September 25—the second successive week in which they recorded a fall.
When you invest in credit, you’re typically compensated for taking more risk via a higher yield. This additional yield on a riskier credit bond is called the credit spread.