October, 2020
After a solid start to the month, loan prices succumbed to risk aversion in the last week of October as investors focused on rising COVID-19 infections in the US, a return to partial lockdowns in Europe, and fading prospects for pre-election stimulus. Loans returned 0.20% during the month, bringing year-to-date returns to -0.46% on a USD basis. Having retraced much, but not all, of the declines since the pandemic began, loan price recovery has slowed in the past couple of months as the ongoing spectre of COVID-19 and the accompanying economic uncertainty have tempered further gains. However, a supportive technical backdrop has remained a crucial stabilising force in the loan market, due to steady new CLO origination and relatively scarce new supply (notwithstanding an increase in issuance this month).
Loans underperformed high yield bonds (0.47%), but outperformed investment grade (-0.17%) in October both on a USD basis. High yield bond prices experienced a similar trajectory as loans, with hopes for stimulus and vaccine development driving an initial rally, which fizzled later in the month. The percentage of loans trading below USD $80 ticked lower from 5.1% to 4.9%, while the top end of the market came under pressure; the percentage trading at or above USD $98 fell from 35.8% to 29.0% in October. From a credit quality perspective, lower quality outperformed again in October; BBs (-0.04%) lagged Bs (0.27%) and CCCs
(0.41%) on a USD basis. The average price in the loan market was USD $94.37 at the end of October. At the current average price, senior secured loans are providing a 6.09% yield inclusive of the forward LIBOR curve.
ticker: CNA0805AU
commentary_block: Array
factsheet_url:
Literature & Forms: https://www.invesco.com.au/home/funds/invesco-wholesale-senior-secured-income-fund
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asset_class: Fixed Income
asset_category: High Yield Credit
peer_benchmark: Fixed Income - High Yield Credit Index
broad_market_index: Global High Yield Credit Hdg Index
structure: Managed Fund