The Morningstar LSTA US Leveraged Loan Index is up 2.09% quarter-to-date as of March 12 and is currently on track for a fifth consecutive month of gains.
While the average bid price of the index has advanced to 96.69, up from 96.23 at the start of the quarter, gains can largely be attributed to the interest return portion as a result of ongoing elevated base rates. Quarter-to-date interest return for the index is at 1.85% relative to a price return of 0.24%.
Higher yielding, lower relative quality loans have driven index performance this quarter, with lower rated B and CCC facilities outperforming lower yielding, higher rated BB rated loans.
CCC rated loans, representing 7% of the index, currently yield 19.09% and have gained more than 5% for the quarter. B rated loans, representing 60% of the index, currently yield 9.77% and are up 2.12% quarter-to-date. Higher rated BB loans, on the other hand, make up almost 25% of the index but have gained just 1.56% over the same period .
Katie Binns, Director of Fixed Income & Multi-Asset, Morningstar Indexes:
“Attractive coupons are driving yet another quarter of strong performance for senior loans. Investor demand continues to outpace supply in the market, driving upward momentum in bid prices in the quarter and further boosting secondary market performance.”
Note: all data as of March 12, 2024
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