Q2 2016 loan market data snapshot Markit \ July 1 2016

\ 2

Q2 2016 Markit loans data snapshot

— Index trend

— Pricing trend

— Sector trend

— ETF asset flows

— CLO trend

— Trade settlement efficiency (T+) trend

Contents

\ 3

Leveraged loan and HY bond total returns 2016

Index trend 2016

Cash loan indices Q2Δ% YTD return

Markit iBoxx USD Leveraged Loan Index 3.12% 4.64%

Markit iBoxx USD Liquid Leveraged Loan Index 2.13% 4.48%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12/31/2015 1/31/2016 2/29/2016 3/31/2016 4/30/2016 5/31/2016 6/30/2016

Markit iBoxx USD Liquid Leveraged Loans Index Markit iBoxx USD Leveraged Loans Index Markit iBoxx USD Liquid High Yield Index

\ 4

Index and pricing data Q2 2016

Region Average bid QTD ∆ YTD % ∆

US 93.52 0.75% 0.19%

Europe 92.35 -1.18% -1.21%

Asia 80.82 -2.10% -1.92%

Average loan spreads to maturity (June 30) 1 year

tenor 3 year tenor 5 year tenor 7 year tenor

BB L+241.83 L+287.90 L+320.02 L+349.31

B L+489.55 L+535.71 L+567.83 L+597.13

CCC L+917.06 L+963.13 L+995.25 L+1,024.54

Average loan spreads Q2 2016 ∆ 1 year tenor 3 year tenor 5 year tenor 7 year tenor

BB -21.35% -16.77% -14.08% -11.67%

B -12.58% -10.87% -9.69% -8.49%

CCC -3.91% -3.37% -2.94% -2.44%

Pricing trend: average bids in the secondary market

Pricing trend: average spreads by credit rating (globally)

\ 5

Sector view – Q2 2016

Q2 change in North American and European leveraged loan sector spreads (bps) BBB- BB+ BB BB- B+ B B- CCC+

Basic Materials NA +18 +16 +8 +6 +1 +5 +6 -107

EU +19 +18 +7 +6 -1 +4 +4 -107

Change NA-EU -1.0 -1.8 +0.9 +0.1 +2.0 +1.5 +1.3 -0.1

Consumer Goods NA +19 +17 +8 +7 +2 +6 +6 -106

EU +22 +21 +10 +9 +2 +7 +7 -104

Current NA-EU -3.0 -3.9 -1.2 -1.9 -0.1 -0.5 -0.7 -2.1

Consumer Services NA +1 -1 -9 -11 -16 -12 -11 -123

EU +4 +3 -8 -8 -15 -11 -10 -121

Current NA-EU -3.3 -4.2 -1.5 -2.3 -0.4 -0.9 -1.0 -2.5

Energy NA +58 +56 +47 +46 +41 +45 +45 -67

EU +61 +60 +49 +49 +42 +46 +47 -64

Current NA-EU -3.7 -4.6 -1.9 -2.7 -0.8 -1.3 -1.4 -2.9

Financials NA -18 -20 -28 -30 -35 -31 -30 -142

EU -14 -15 -26 -27 -34 -29 -28 -139

Current NA-EU -4.0 -4.9 -2.2 -2.9 -1.1 -1.5 -1.7 -3.1

Healthcare NA +21 +19 +11 +9 +4 +8 +9 -104

EU +24 +23 +12 +11 +4 +9 +9 -101

Current NA-EU -3.1 -4.0 -1.3 -2.1 -0.2 -0.7 -0.8 -2.3

Industrials NA +13 +11 +3 +1 -4 +0 +1 -111

EU +15 +14 +3 +3 -4 +0 +1 -110

Current NA-EU -2.3 -3.1 -0.4 -1.2 +0.7 +0.2 +0.0 -1.4

Technology NA -5 -7 -15 -17 -22 -18 -18 -130

EU -3 -4 -15 -16 -23 -18 -18 -128

Current NA-EU -2.3 -3.2 -0.5 -1.2 +0.6 +0.1 +0.0 -1.4

Telecommunication Services NA +4 +2 -6 -8 -13 -9 -8 -121

EU +9 +8 -3 -4 -11 -6 -6 -116

Current NA-EU -5.1 -5.9 -3.3 -4.0 -2.2 -2.6 -2.8 -4.2

Utilities NA +12 +10 +2 +0 -5 -1 -0 -113

EU +17 +16 +5 +5 -2 +2 +3 -108

Current NA-EU -5.6 -6.4 -3.7 -4.5 -2.6 -3.1 -3.3 -4.7

\ 6

ETF asset flows Q2 2016

ETF Type 2016 Q2 net asset flow YTD net asset flow Loan $1,127,668,303 $1,105,491,617

ETF Type 2016 Q2net asset flow YTD net asset flow HY Bond $(6,055,422,640) $326,276,715

$(150)

$(316)

$444

$(71)

$584 $614

$(400)

$(200)

$-

$200

$400

$600

$800

January February March April May June

Mill

ion

s

Senior Loan ETFs

(0.080)

1.610

4.852

0.233

(2.360)

(3.929) $(5)

$(4)

$(3)

$(2)

$(1)

$-

$1

$2

$3

$4

$5

$6

January February March April May June

Bill

ion

s

High Yield ETFs

\ 7

ETF asset flows Q2 2016

ETF Type 2016 Q2 ending AUM Q2 % ∆ in AUM YTD % ∆ in AUM Loan $6,301,483,669 11.84% 13.36%

ETF Type 2016 Q2 ending AUM Q2 % ∆ in AUM YTD % ∆ in AUM HY Bond $54,211,898.825 (3.79%) 13.05%

Year-to-date

-2.78%

-6.23%

7.88%

-1.25%

9.36%

1.00% -0.17%

3.24%

8.61%

0.40%

-4.20%

-3.40%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

January February March April May June

Asset Flows as % of AUM

Loan Asset Flows as % of AUM High Yield Asset Flows as % of AUM

\ 8

CLO trend Q2 2016

CLO 2.0 spreads in the secondary trading market tightened considerably from April to until the Brexit

referendum. Since the referendum U.S and European spreads widening 10-70bps and 30-200bps,

respectively. 2.0 European CLO portfolios contain around 15% exposure to UK collateral and a recession

would trigger further credit deterioration in these deals. Price volatility is most pronounced in lower mezz

paper and equity, with further tiering across deals and managers.

650

700

750

800

850

900

950

1000

1050

1100

1-Apr 16-Apr 1-May 16-May 31-May 15-Jun

Dis

co

un

t M

arg

in (

DM

)

Average 2.0 Eur BB

Average 2.0 US BB

Average BBs (over 20% UKExposure)

CLO 2.0 BB trend

\ 9

Settled trade volume in the secondary market (LSTA)

Loan market settlement efficiency Q2 2016

391.5 355.7

529.8

647.3 628.0

317.3

18.1

19.8

23.0

21.1 19.3

18.4

0.00

5.00

10.00

15.00

20.00

25.00

0

100

200

300

400

500

600

700

2011 2012 2013 2014 2015 2016 (Q2)

Billi

on

s

LSTA Secondary Par Settled Notional

T+

(b

us

ine

ss

da

ys

)

Source: Markit Loan Settlement

236.1 244.4

353.8

475.2

548.3

321.9

18.1

19.8

23.0

21.1

19.3 18.4

0

5

10

15

20

25

0

100

200

300

400

500

600

2011 2012 2013 2014 2015 2016(Q2)

Th

ou

sa

nd

s

LSTA Secondary Par Settled Allocations

Source: Markit Loan Settlement

T+

(b

us

ine

ss

da

ys

)

\ 10

Loan market settlement efficiency Q2 2016, contd

107.6 101.5 100.0

82.4 83.8

96.0

86.0 90.0

109.1

144.3 143.4

133.1 125.6

171.9 174.4 175.5

160.2 154.0 151.5

162.3

152.7

164.6

17.8

19.3

17.1

18.4

17.2

19.5

21.1 21.2

22.7 23.1

25.0

20.9 21.8

20.2 21.3 21.2

19.6 19.3 20.2

18.2 19.3

17.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0

20

40

60

80

100

120

140

160

180

200

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2

2011 2012 2013 2014 2015 2016

T+

(b

usin

es

s d

ays

)

Billi

on

s

LSTA Secondary Par Settled Notional by Quarter

Source: Markit Loan Settlement

\ 11

From the Markit commentary team:

“After witnessing a dramatic turnaround in Q1 this year, leveraged loans continued

to post strong returns into Q2. With Brexit so far showing a minimal impact on

returns, factors for the asset class such as stable commodity prices, looser

monetary conditions in the US, and falling risk free yields all contributed to positive

investor risk sentiment.”

- Neil Mehta, credit market analyst at Markit

For full commentary from our analysts go to www.markit.com/commentary

Analysis

\ 12

Contact:

Alex Paidas

Corporate Communications

alex.paidas@markit.com

+1 212 205 7101

Contact

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