Q4 2018 Leveraged Loan Market Data Snapshotcdn.ihs.com/www/pdf/0119/IHS Markit Leveraged Loan Data...
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Q4 2018 Leveraged Loan Market Data Snapshot IHS Markit January 4, 2019
Transcript of Q4 2018 Leveraged Loan Market Data Snapshotcdn.ihs.com/www/pdf/0119/IHS Markit Leveraged Loan Data...
Q4 2018 Leveraged Loan Market Data SnapshotIHS Markit
January 4, 2019
Contents
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Q4 2018 IHS Markit Leveraged Loan Market Data Snapshot
• Loan index trend
• Bond index trend
• Pricing trend
• Sector trend
• CLO trend
• Trade settlement efficiency (T+) trend and trade settlement volume
Loan index trend – 2018
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Leveraged Loan Total Returns
Loan Indices Q4Δ% YTD return
Markit iBoxx USD Leveraged Loan Index -3.50% 0.35%
Markit iBoxx USD Liquid Leveraged Loan Index -4.57% -0.63%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
Markit iBoxx USD Liquid Leveraged Loan Index Markit iBoxx USD Leveraged Loans Index
Bond index trend – 2018
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High Yield & Investment Grade Total Returns
Loan Indices Q4Δ% YTD return
Markit iBoxx USD Liquid High Yield Index -4.46% -1.51%
Markit iBoxx USD Liquid Investment Grade Index -0.48% -3.69%
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
Markit iBoxx USD Liquid High Yield Index Markit iBoxx USD Liquid Investment Grade Index
Pricing data trend Q4 2018
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Region Average bid Q4 ∆% YTD ∆%
US 95.45 -2.35 -1.51
Europe 93.39 -2.00 -2.79
Asia 93.87 -0.74 1.89
Average loan spreads to maturity (December 31)
1 year tenor
3 year tenor
5 year tenor
7 year tenor
BB L+268.9 L+297 L+318.2 L+334.6
B L+490.1 L+518.2 L+539.4 L+555.8
CCC L+837.7 L+865.8 L+887 L+903.4
Average loan spreads Q4 2018 ∆
1 year tenor
3 year tenor
5 year tenor
7 year tenor
BB 58.55% 47.91% 38.29% 23.51%
B 39.51% 35.48% 30.99% 22.80%
CCC 10.92% 10.08% 8.74% 5.46%
Pricing trend: average spreads by credit rating (globally)
Pricing trend: average bids in the secondary market
Pricing data trend – 2018
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90.00
90.50
91.00
91.50
92.00
92.50
93.00
93.50
94.00
94.50
95.00
95.50
96.00
96.50
97.00
97.50
98.00
US Europe
Average Bid Price (Secondary Market)
Sector view – Q4 2018
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Q4 change in North American and European leveraged loan sector spreads (bps)
BBB- BB+ BB BB- B+ B B- CCC+
Basic Materials NA +31 +66 +77 +94 +113 +120 +113 +97
EU +20 +55 +67 +83 +97 +106 +91 +86
Change NA-EU +10.5 +10.7 +10.0 +10.8 +15.8 +14.6 +21.9 +10.8
Consumer Goods NA +22 +57 +69 +86 +104 +112 +104 +88
EU +12 +47 +60 +76 +89 +98 +83 +78
Current NA-EU +9.5 +9.8 +9.0 +9.9 +14.9 +13.6 +21.0 +9.9
Consumer Services NA +56 +91 +103 +120 +138 +146 +138 +122
EU +47 +82 +94 +110 +124 +132 +118 +113
Current NA-EU +9.1 +9.4 +8.6 +9.5 +14.5 +13.2 +20.6 +9.5
Energy NA +4 +39 +50 +67 +86 +93 +86 +70
EU -8 +27 +40 +56 +69 +78 +63 +58
Current NA-EU +11.1 +11.4 +10.6 +11.5 +16.5 +15.3 +22.6 +11.5
Financials NA +44 +79 +91 +108 +127 +134 +126 +110
EU +33 +68 +80 +96 +110 +118 +104 +99
Current NA-EU +11.3 +11.6 +10.8 +11.6 +16.7 +15.4 +22.8 +11.6
Healthcare NA +29 +64 +76 +92 +111 +118 +111 +95
EU +20 +54 +67 +83 +97 +105 +90 +85
Current NA-EU +9.2 +9.4 +8.7 +9.5 +14.5 +13.3 +20.6 +9.5
Industrials NA +27 +62 +73 +90 +109 +116 +109 +93
EU +17 +51 +64 +80 +94 +102 +87 +82
Current NA-EU +10.0 +10.2 +9.5 +10.3 +15.3 +14.1 +21.4 +10.3
Technology NA +28 +63 +75 +92 +111 +118 +111 +94
EU +19 +54 +67 +83 +96 +105 +90 +85
Current NA-EU +9.1 +9.4 +8.6 +9.5 +14.5 +13.3 +20.6 +9.5
Telecommunication Services NA +73 +108 +120 +136 +155 +162 +155 +139
EU +63 +98 +111 +127 +140 +149 +134 +129
Current NA-EU +9.5 +9.7 +9.0 +9.8 +14.8 +13.6 +20.9 +9.8
Utilities NA +40 +75 +87 +104 +123 +130 +123 +106
EU +29 +64 +76 +92 +106 +114 +100 +94
Current NA-EU +11.5 +11.8 +11.0 +11.9 +16.9 +15.6 +23.0 +11.9
CLO trend Q4 2018
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2.0 US CLO BB Spreads 2016 vs. 2018
2018 closed with a record issuance of ~$128bn in new issue (~$121.5bn in resets and ~$33bn in refinancings). CLOmanagers have had to navigate a particularly challenging market leading up to the year-end given the broader creditsoftness from the accelerated selloff in loans in December. 2.0 BB spreads inched wider towards the same inflexion pointcompared to this time two years ago, ~60 bps shy of year-end levels after the market rebounded from the energy marketslump in early 2016. While the correction in the loan market presents an opportunity to purchase cheaper credits, theliability costs are expected to rise in the new year, as evidenced by the latest 2.0 AAA print of 3ML+120/130, notablyhigher than the tightest paper in March.
0
100
200
300
400
500
600
700
800
900
Averag
e D
isco
un
t M
arg
in (
DM
)
CLO US 2.0 BB (2016) CLO US 2.0 BB (2018)
Trade settlement volume – 2018(excluding “When Issued” trades)
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Average T+ time and LSTA Secondary Par Settled Notional
Average T+ time and LSTA Secondary Par Settled Allocations
318.7
455.8
578.4 587.6
578.5626.1
763.518.8
21.3
19.718.6
17.4 18.3 16.1
0
5
10
15
20
25
0
100
200
300
400
500
600
700
800
900
2012 2013 2014 2015 2016 2017 2018
Source: Markit Loan Settlement
214.7
298.9
417.8
510.3
589.9617.3
761.5
18.8
21.3
19.718.6 17.4
18.3
16.1
0
5
10
15
20
25
0
100
200
300
400
500
600
700
800
2012 2013 2014 2015 2016 2017 2018
Source: Markit Loan Settlement
Billio
ns
Th
ou
san
ds
T+
(b
usin
ess d
ays)
T+
(b
usin
ess d
ays)
Trade settlement efficiency 2018(excluding “When Issued” trades)
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76.9
85.278.278.3
96.6
115.7
127.7
115.8112.1
150.3154.7
161.3152.4
142.1141.1
152.0
143.9
154.3
139.1141.2152.9
168.6
146.5
158.0
161.1
184.7193.5
224.3
16.4
18.8
19.920.2
21.821.9
22.9
18.7
20.7
18.7
19.8 19.8
18.7
18.8
19.5
17.518.6
17.417.9
15.7
17.3
18.8 18.818.0
16.816.4
17.1
14.4
0.0
5.0
10.0
15.0
20.0
25.0
0
50
100
150
200
250
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2012 2013 2014 2015 2016 2017 2018
T+
(b
usin
ess d
ays)
Billio
ns
LSTA Secondary Par Settled Notional by Quarter
Source: Markit Loan Settlement
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2016-08-04
