CS Index Loans Posted Record One-Week Price, Percentage Declines Last Week
Earlier on LFI: Most veteran loan players took it as an article of faith that the October 2008 crash would be the worst of their careers. Last week proved them wrong, and then some. Amid a generational collapse in the price of risk assets across the spectrum and ever bleaker GDP forecasts from prominent economists, the average bid of the Credit Suisse Loan Index plunged 10.28 points, or 11.55%, to 78.65 on March 20—the lowest point since July 22, 2009—from 88.92 on March 13. In absolute and percentage terms, the declines exceeded the plunge of 6.24 points and 7.72% for the week ended October 10, 2008, during which Lehman defaulted and the financial system largely seized up.
The average discounted spread to three years (ST3YR) of the Index jumped in response by 436 bps last week—another dubious record—to L+1175, the widest since May 27, 2009.
Through March 20, the average bid of CS Index Loans is down by 18.0 points, or 18.6%, since the bear market commenced on February 19; year-to-date, it is down 17.9 points and 18.5%.
Friday brought a respite to the overall gloom. High-beta loans caught a bid during the morning session before falling back as the stock market rally faltered and equity prices fell into the red. Still, it proved to be a moral victory as the CS Index bid eased by just 0.28 point, or 0.36%. That was a big improvement from the average daily decline of 2.50 points, or 2.93%, earlier in the week. What stanched the bleeding on Friday, players say, was a combination of slowing outflows from mutual funds and nibbling by non-traditional players—private equity firms, credit opportunity account and dislocations funds—on beaten-down, higher-quality names. As a result, BB loans managed to eke out a small gain Friday while losses down the rating scale persisted.
Please contact me to continue reading, [email protected]