Monthly US Loan Market Update - February 2020

Monthly insights and updates from the Invesco Fixed Income team.

The senior secured loan market began 2020 with a 0.56% monthly gain1 as the supportive price environment of December extended into the new year. Loan prices vaulted higher in the first weeks of January on optimism over the  ‘phase-one’ US-China trade agreement and receding recession fears; however, the coronavirus outbreak late in the month dampened investor enthusiasm and caused prices to retrace much of their early gains. With markedly improved demand in loans beginning in December and inadequate new issue supply, a wave of repricing activity swept through the market in the first weeks of January as many issuers sought to capitalize on their loan prices topping par. Issuers encountered little, if any, resistance to these efforts early in the month, but investor pushback became more pronounced as the market softened and, ultimately, several repricing attempts were abandoned towards month-end.

Loans outperformed high yield bonds (0.00%) in January, but underperformed investment grade (2.38%)2 and the 10-year Treasury (3.71%). As repricings dominated the market during the month, the percentage of loans trading above par fell slightly from 53% to 48%.3 “BBs” (0.30%) lagged “Bs” (0.66%) and “CCCs” (1.29%) in light of the buoyant price environment early in the month.4 The average price in the loan market was $97.36 at the end of January.5 At the current average price, senior secured loans are providing a 5.77% yield inclusive of the forward LIBOR curve.5

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^1 S&P/LSTA Leveraged Loan Index as of Jan. 31, 2020.
^2 S&P/LSTA Leveraged Loan Index and Bloomberg as of Jan. 31, 2019. High yield represented by BAML US High Yield Index;
investment grade represented by the BAML Investment Grade Index.
^3 JP Morgan as of Jan. 31, 2020.
^4 S&P LCD as of Jan. 31, 2020. 
^5 S&P LCD and Invesco as of Jan. 31, 2019.