A primer brought to you by S & P Global that dissects all aspects of syndicated loans.

Syndicated Loans: The Market and the Mechanics, a primer created for the Loan Market participant.

The U.S. senior secured institutional term loan asset class provides a number of benefits to investors, including a floating-rate coupon, a large and liquid market, lower credit and interest-rate risk than high-yield bonds, and many ways to gain exposure.

Investors in loans like their short duration, high position in the capital structure and their floating-rate attribute that has resulted in better returns than other fixed income instruments. LSTA Executive Director Bram Smith met with four leading loan market participants to discuss the current state of the market, the issues it faces, and how senior loans can enhance institutional portfolios.

The secondary loan market rallied across November, driven by post-election optimism that boosted investor demand for broadly syndicated loans (BSL) and other risk assets. The average price for BSL in the secondary market advanced in 12 of 19 trading sessions in the month, ending 35 basis points higher at 97.25, the highest level since May 2022.

LSTA secondary loan trading volume remained elevated in November at $72.3 billion, noting that monthly activity remained above the $70 billion barrier for the second month running and for the first time since May.  While November volume slipped 9% month-over-month, October was a hard comp to beat at $79.4 billion, the third busiest month on record, according to the LSTA’s Trade Data Study.

Over the past three decades, the senior loan market has grown  from relatively modest beginnings into an essential element of corporate finance, playing a core-plus role in institutional fixed-income allocations.  In 2018, the S&P/LSTA Leveraged Loan Index, an indicator of market size, surpassed $1 trillion in outstandings.

The LSTA presents the results of the second quarter Secondary Trading & Settlement Study.  Presented by Ted Basta, EVP of Market Analytics and Investor Strategy, and Hugo Pereira, VP of Analytics and Strategy of the LSTA.