Tuesday, January 13, 2009
Credit markets update: The rally continues
This evening's email update from one of the top banks tells of still more improvement in the secondary loan market (bold emphasis added):
The positive sentiment and price appreciation within the High Yield and Leverage Loan market from early December have held so far despite the fade in the equity market over the past week.
In fact, the Double-BB and Single B Index yields have now improved every trading session since December 15th, despite an equity market that remains flat to modestly down over the same period (and feels like its going lower). While the credit markets remain fragile, the debt and equity markets are not trading in lock-step of late; this may reflect investors belief that credit had been over-sold....
Drivers of this Rally in Credit Include:
- Perception of value in credit versus equities
- Strong performance of the limited, recent new issuance (both El Paso and KSU up over 14 points from new issue, and recent Cablevision deal up over 4 points)
- Building liquidity among all investors, including $2.4 billion of inflows to high yield mutual funds in last 3 weeks alone
For those few of you who are new to these posts, the recovery in the secondary loan market is an essential precondition to the making of new loans to new borrowers. A longer, video explanation is here.
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