European leveraged loan market sentiment has taken a decided turn for the better.
The ECB announcement earlier in the month, combined with inflows into European and U.S. high-yield funds, as well as actual inflows into U.S. loan funds, have brightened the mood. And the arrival of new issuance in loan and bond markets has helped to lift investors’ spirits, landing Europe back in price-discovery mode.
The secondary market is recovering after a brief but steep dive in early February, during which the bid-offer spread of the flow names widened to 100 bps – a level not seen since January 2013.
“The market turned very negative very quickly, and now it has bounced back very quickly,” says a fund manager.
Indeed, one fund manager says that a danger now is a sudden burst of exuberance and a blind haste to book primary assets that leads straight back down the road to overly-aggressive debt structuring and insufficient flex language. “We learn, and we forget,” an arranger says. – Ruth McGavin
This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.
