Tag Archives: senior loans
Preferred Stock and Senior Loan Solutions for Yield-Starved Investors
So far in 2021, the fixed income market certainly hasn’t been very fixed—instead posting negative returns—nor has it offered much income, with yields of just over 1%. U.S. equity and bond indices both posted strong performance in 2020, driving up asset class correlations and dropping yields to new lows. So, when the 10-year U.S. Treasury…
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Are Leveraged Loans Losing Their Luster…or Poised to Shine?
Leveraged loans (also called senior loans or bank loans) typically pay a two-part coupon—a market-driven base rate (30-90 day LIBOR) plus a contractual credit spread. As shown in Exhibit 1, the weighted average credit spread of U.S. leveraged loans, as measured by the S&P/LSTA Leveraged Loan 100 Index, has fallen steadily and now sits at…
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Floating Securities in Advance of Rising Rates
This Wednesday, the Fed announced that they would begin raising rates, a decision that has left many investors with questions about how they will fare in this changing environment. Knowing that conventional, fixed-rate securities sometimes lose value when interest rates increase has some investors looking to floating-rate securities instead. Floating-rate securities are designed to mitigate…
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Rising Interest Rates May Not Have an Immediate Impact on Senior Loan Rates
Following months of uncertainty, the U.S. Federal Reserve has indicated that there could soon be a hike in the Federal Funds Target Rate. Interest rates have been kept in a range between zero and one-quarter of a percent since December 2008 and have not risen since June 2006. As interest rates have been at historically…
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Leveraged Loans: Not so obscure anymore
Leveraged loans or Senior Loans once an obscure area in Fixed Income space has seen real growth in assets inflow in last couple of years. Lipper reported a 95 week of net inflows in loan funds that ended in April of this year. What are senior loans and what makes them so attractive in this…
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- Equities, Fixed Income
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Three Myths of the U.S. Senior Loan Market
The S&P/LSTA U.S. Leveraged Loan 100 Index has returned 1.76% year to date under performing vs. fixed rate high yield bonds. The low rate environment and continued demand for yield generating asset classes has pushed the S&P U.S. Issued High Yield Corporate Bond Index returns to 4.32% year to date as yields have fallen by…
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Floating Rate Asset Classes
In the weekend Wall Street Journal (May 3, 2014) there is an informative article entitled “The Risks of Floating Rate Funds”. The article does a great job of delving into the risks of these types of structures and is quite timely as the low rate environment continues. The investor appetite for floating rate assets while facing…
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After The Fireworks
It was back to business in the U.S. after the July 4 holiday, which fell on a Thursday this year and made for a much needed four day weekend. The bond markets had a lot to look forward to this week as the Treasury auctioned a total of $66 billion of issuance in three, 10,…
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Anticipation, It’s Making Me Wait
And waiting is exactly what the markets did for most of Wednesday, right up until the 2 p.m. press release from the Federal Open Market Committee (FOMC) meeting. Following the press release, markets sold off on confirmation that economic activity has been expanding at a moderate pace. As the release stated, “Labor market conditions have…
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Senior Loans & High Yield Bonds
Duration is everything in a rising interest rate environment. Senior loans, as tracked by the S&P/LSTA U.S. Leveraged Loan 100 Index are down 0.34% month to date. These floating rate below investment grade loans have seen their weighted average yield rise by 19bps since May month end. Meanwhile, fixed rate high yield bonds tracked in…
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