Cash outflows for bank loan funds increased to $457 million in the week ended July 2, from $424 million last week, but were well below the $1.2 billion three weeks ago, according to Lipper.
This is the eighth consecutive outflow, for a net $4.94 billion withdrawal over that span, representing the largest multiweek depletion since a run of outflows in August 2011. Extrange-traded fund inflows of $28 million barely offset outflows from mutual funds of $485 million.
The outflow marks the eleventh weekly withdrawal in the past 12 weeks, a stretch that put an end to a 95-week inflow streak totaling $66.7 billion.The trailing four-week reading moves to negative $618 million per week, from negative $779 million last week and $792 million two weeks ago.
Year-to-date inflows now total just $1.2 billion, of which $804 million, or 70% of the sum, is ETF-related. In the comparable year-ago period, inflows were $28 billion, with 12% tied to ETFs.
The change due to market conditions was positive $323 million this week compared to total assets of $108.8 billion at the end of the observation period, with ETFs comprising $8.2 billion of the total, or approximately 8%. – Joy Ferguson
Every aspect of CLO generation pushed skyward in the second quarter. Formation of new vehicles pushed to a quarterly high of $35.25 billion. Moreover, the number of managers that inked a deal during the 12 months to the end of June, for instance, reached a post-credit-crunch high of 77, from 92 in 2013.
Muscular demand up and down the capital stack has also brought Humvee-sized CLOs back into fashion, with the economy models of recent years now passé. On average, 2014 vehicles weigh in at $542 million – and an even more sturdy $570 million during the second quarter alone – up from $481 million in 2013. For reference, the 1.0-era high was $571 million, from 2007.
Managers expect the good times to continue in the CLO market. For one thing, the pipeline of new vehicles, by all accounts, has never been more crowded. For another, demand for CLO equity and liabilities has shown no sign of flagging. Finally, with retail on its heels for the time being, CLO managers are able to call the tune on secondary prices and new-issue clearing levels. For these reasons, in part, strategists across the Street have raised their 2014 volume forecasts in recent months. Here are some of the current views:
- Wells Fargo: $80-90 billion for the year
- J.P. Morgan: the upper end of a $90-100 billion range
- Morgan Stanley: $85-95 billion
- Credit Suisse: roughly $90 billion
This year’s new-deal bonanza notwithstanding, unwinding legacy 1.0 vehicles have slowed the growth of CLOs outstanding, thereby acting as a drag on CLO buying power overall. This chart from Wells Fargo CDO analyst David Preston illustrates the point:
– Steve Miller
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Amid firm market conditions throughout the month of June, the average price at which first-lien institutional loans broke into the secondary market rose to a three-month high of 100.26% of par, from 99.84 in May.
LCD subscribers can click here to access full story, analysis, and charts:
- Averaged difference between OID and break price
- Average new-issue yield to maturity for leveraged loans
– Kerry Kantin
The supercharged CLO market notched another record with June’s new issue supply of $13.78 billion, which counts as the most ever issued in a single month, according to LCD, eclipsing a previous high of $13.50 billion in August 2006.
Issuance in the year to date is now at $60.57 billion from 113 deals, according to LCD.
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- Quarterly issuance
- US Institutional Spreads
– Sarah Husband
Loan prices inched higher in June as the CLO market set a record for new-issue volume.
The S&P/LSTA Leveraged Loan Index was up 0.58% during the month after advancing 0.69% in May – though the difference between the two months vanishes when Energy Future Holdings’ outsized May increase is accounted for (excluding EFH, May’s Index return was 0.57%). The largest loans that comprise the S&P/LSTA Loan 100 lagged slightly in June, with a 0.55% gain.
LCD subscribers can click here to access full story, analysis and the following charts:
- Annual returns of the S&P/LSTA Leveraged Loan Index
- Annual returns of the S&P/LSTA Loan 100 Index
- Returns by type of debt
- Average bid of S&P/LSTA Index
- Institutional M&A forward calendar
- Big movers
– Steve Miller
S&P’s European Leveraged Loan Index (ELLI) returned 0.89% during June. The total return for the ELLI in the year to date is 2.92%
Junior-claim loans remained hot during the second quarter, with $12.4 billion of new-issue volume, up from the first quarter’s post-credit-crunch high of $11.7 billion. In the year to date, second-lien volume totals $24.1 billion, which is the second-highest six-month total on record, behind only the first half of 2007 ($25.2 billion)
For a complete description of how second-lien loans work check out LCD’s free Loan Market Primer.
It has been quite the month for the CLO markets in June with issuance in both the U.S. and Europe breaking records and global volume pushing up to $69.66 billion. The summer’s onset could see supply tail off over the coming weeks, but pipelines are still bulging with arrangers booking new managers through to 2015.
LCD subscribers can click here to access full story and analysis, including charts:
- CLOs prices in US last week
- US arbitrage CLO issuance and institutional loan volume
- YTD European CLO issuance, deals and details
- Deal pipleline
- European arbitrage CLO issuance and institutional loan volume
. – Sarah Husband
With four deals pricing this week, U.S CLO issuance in the month of June has swelled to $12.65 billion, which is the highest monthly total since the credit crisis, topping April’s $12.33 billion, according to LCD.
Jonathan Rabinowitz has joined Highbridge Principal Strategies as a portfolio manager for the Highbridge broadly syndicated loan and CLO portfolios, according to sources. He started in April, and reports into portfolio manager David Frey.
Prior to joining Highbridge, Rabinowitz was a co-portfolio manager at Invesco Senior Secured Management, and was previously a co-portfolio manager in Morgan Stanley Asset Management’s Senior Loan Group. – Sarah Husband