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Secondary loan market softens in 4Q19

European Chart of the Week: 15th November 2019

As in the primary market, the European secondary loan market has been more bifurcated recently as investors have shown increased caution around riskier and struggling credits. Some investors also turned their eyes towards the US market, trying to take advantage of an uptick in volatility in that space.

The European secondary market has softened in the current quarter, with the average bid on institutional term loans down 65 bps to 97.88. At the upper-end of the market, the par-plus share slipped by 18 percentage points to 39%. However, at the lower end of the market (sub-90 price range), the market is holding up relatively better than in the US market. In the US, the sub-90 share of loans has climbed to 14%, a 9 percentage point gain since August, as weaker and downgraded credits find less buyer support. In comparison, the sub-90 bucket has shown a smaller degree of change in Europe this quarter, edging up by 2 percentage points to 6% of the market.

On a total return basis, Western European leveraged loans were down 0.35% in October and have ticked up 0.14% so far in November, leaving the year-to-date return at 3.96%, according to Credit Suisse.

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