In June, the European secondary loan market experienced its worst returns in two years. However, unlike in June 2016 — when the market was reacting to a geopolitical event, namely the U.K.’s Brexit vote — this year the trigger was market-driven, with secondary prices tumbling as loan investors rotated out of lower-priced names to take advantage of higher yields amid a rapidly repricing primary market.
As a result of steep secondary price declines, the S&P European Leveraged Loan Index (ELLI) lost 0.43% last month — the first time this measure has been in the red this year, and the worst performance since the 0.60% loss recorded in June 2016. The first five months of 2018 delivered positive (albeit unspectacular returns), averaging 0.27% per month (excluding currency fluctuations). For the year through June 30 the ELLI was up 0.90%, a far cry from the 2.65% gain racked up in the first half of 2017. – Marina Lukatsky
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