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September shows drop in loan prices, LSTA secondary trading study finds
By Sara Rosenberg
New York, Sept. 26 - The month of September brought with it a decline in mark-to-market loan prices and this drop has actually been prevalent since the end of the second quarter, according to a secondary trading study done by the LSTA.
During the month of September, loan prices fell 3% on heavy volatility as bid-ask spreads gapped out considerably, and since the end of the second quarter, prices have fallen 5.5% to a sub 84 level.
The median bid in September fell to 88.75 from 91.25.
By comparison, for the second quarter, mark-to-market loan prices gained 3.7% as bid-ask spreads tightened 40 basis points.
In addition, the study found that the S&P/LSTA Leveraged Loan Index year-to-date return fell below negative 4%.
The study also looked at trading volume in the second quarter and found that there was a decline largely because of a substantial decrease in European trading.
Second quarter secondary trade volume totaled $142 billion, with $137 billion of that being U.S. volume and $5 billion of that being European volume. Compared to the first quarter, total volume was down 11%, U.S. volume was down 5% and European volume was 68%.
Volume below 90 decreased 20% to $51 billion in the second quarter and distressed volume below 80 increased 19% to $16 billion.
For the purposes of reporting trade volume, the LSTA defines par trades at a price between 80 and 103, and distressed trades below 80 or above 103. Prior to the first quarter, distressed trades were defined at below 90 or above 103.
The study is comprised of trade data from 23 of the largest buy- and sell-side member institutions of the LSTA.
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