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Secondary Market Trends in Leveraged Loans

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Updated

CLO deals

Collateralized loan obligation (or CLO) deals jumped last week. Seven CLO deals totaling $3.5 billion came through in the week ended March 20. This was up from the previous week’s levels when two deals totaling $1.01 billion were priced.

Year-to-date issuance and transaction figures now stand at $24.8 billion and 46 deals, respectively, according to S&P Capital IQ Leveraged Commentary and Data (or LCD).

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Outflows quicken in leveraged loan funds

According to data from Lipper, leveraged loan mutual funds continued to see outflows in the week ended March 20. The quantum of outflows was $228 million, which was up compared to a net outflow of $31 million in the previous week.

Last week brings the total net outflows from leveraged loan mutual funds to $4.2 billion year-to-date. Senior loans are tracked by the Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Loans of Avago Technologies Ltd. (AVGO), Charter Communications (CHTR), and Community Health Systems Inc. (CYH) are among the holdings in BKLN.

In comparison, high yield bond (JNK) (HYG) funds recorded outflows of $1.0 billion, and equity (SPY) funds recorded inflows of $8.6 billion last week. Inflows to equity funds jumped from $994 million recorded in the previous week.

The primary market saw subdued activity as companies held back debt issuing plans to see the outcome of the Federal Reserve’s meeting. C&J Energy Services (CJES) was the largest issuer, raising loans to acquire a unit of Nabors Industries Ltd. (NBR). You can read more about the primary market activity in Part 5 of this series.

Returns on leveraged loans

Returns on leveraged loans trended down in the week ended March 20. The S&P/LSTA U.S. Leveraged Loan 100 Index fell by ~0.2% over the week ended March 20. The index is up by 1.6% year-to-date.

Meanwhile, the Invesco PowerShares Senior Loan Portfolio (BKLN), which provides exposure to senior loans, was also down by 0.2% week-over-week. However, it remained up by 0.5% year-to-date.

For more bond market trends and analyses, please visit Market Realist’s Fixed Income ETFs page.

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