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European Chart of the Week: 20th December 2019
The European secondary loan market, like the US market, has climbed higher in December on the back of improved investor sentiment and limited new loan supply. With new money institutional loan issuance totaling just EUR 2.3bn this month in the primary market, investors have also had to look to the secondary market to pick up assets. The average bid is now at 98.21, a 24 bps increase this month, with the par-plus share climbing to 51%, back to where it was in October. In comparison the US market par-plus share is in the same area (47%) but this represents its highest level since October 2018.
The US market has been relatively more volatile than its European counterpart in recent months, retreating in October in the face of bifurcation based on rating, with investors more cautious around riskier deals. But the US market has bounced back this month on the back of a rebound in prices at the lower end of the risk spectrum. It’s been the same story in Europe, though the price swings have been less pronounced, declining by less in the October-November time period (-56bps in Europe vs. -101bps in the US) and rebounding less in December to-date (24bps in Europe vs. 96bps in the US).
From a total return perspective, the Credit Suisse Western European loan index is up 0.57% month-to-date and 4.84% year to date through December 17.