In October, the leveraged loan market experienced heightened volatility as global growth concerns and the end of the Fed’s asset purchasing program weighed on the high-yield market. For the week ended October 22, outflows from bank loan funds reached $1.66 billion, compared to $946 million in outflows for the week before.
However, in a research note, Kevin Horan, Director of Fixed Income Indices at S&P Dow Jones Indices, argued that leveraged loans could remain steady as other fixed-income assets fumble ahead of the Federal Open Committee meeting.
“Market sentiment can change quickly though and if news from the FOMC does undermine the current risk-on environment; leveraged loans could to be the least volatile in price,” Horan said. “Compared to the municipal high yield’s 7.35 year duration and the U.S. Issued High Yield’s duration of 4.86%, the weekly reviewed leverage loan index will be least effected to the change in rates.”
The FOMC meeting begins Tuesday and the committee will announce its decision Wednesday, October 29. [Senior Loan ETFs Still Have Rising Rates Appeal]
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.