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Senior Loan Talking Points

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Mohamed Basma

Mohamed Basma, CFA

Managing Director, Head of Leveraged Credit

Bank building

Weekly Notables

While new tariff headlines resulted in a modest pickup in volatility across most risk assets, the loan market continued to firm this week. The Morningstar LSTA US Leveraged Loan Index (Index) gained 0.28% for the seven-day period ended July 10. Most of the gain was driven by the change in the market value component of returns, with the average Index bid price advancing by 24 basis points (bps) to 97.43. 

In the primary market, new-issue activity accelerated following last week’s holiday-induced lull. Arrangers launched a total of $11.6 billion in volume with a healthy mix of M&A, refinancings and dividend recapitalizations. With the improvement in trading levels, repricing activity also made a meaningful return, as $19.1 billion was repriced across 13 transactions. Looking ahead, net of approximately $31.1 billion of anticipated repayments that aren’t associated with the forward calendar, repayments outstrip supply by roughly $15.2 billion this week, compared to repayments outstripping supply by $17.2 billion last week. 

Loan prices in the secondary market continued to firm this week. Across rating categories, lower-rated segments of the market generally outperformed, as risk appetite remains healthy. Looking at investor demand, CLO managers issued three new deals this week. This brings the YTD tally to a robust $104.5 billion. Retail loan funds posted a $97 million inflow for the week ended July 9, extending the inflow streak to three weeks. Flows were led by exchange-traded funds (ETFs), as mutual funds experienced a modest net withdrawal. 

There were no defaults in the Index this week.

Average Bid
July 1, 2021 to July 10, 2025
Average Bid
Average 3-YR Call Secondary Spreads 1,2
July 1, 2021 to July 4, 2025
Average 3-YR Call Secondary Spreads 1,2
Lagging 12-Month Default Rate 3
July 1, 2021 to July 10, 2025
Lagging 12-Month Default Rate 3
Index Stats
Index Stats

Source: Pitchbook Data, Inc./LCD, Morningstar ® LSTA ® Leveraged Loan Index. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index. *The Index’s average nominal spread calculation includes the benefit of base rate floors (where applicable).

Monthly Recap: June 2025

The loan market had another solid month, as broader risk sentiment continued to firm on the back of stable economic data and easing geopolitical concerns. Against this backdrop, the Index gained 0.80% in June, bringing the YTD return to 2.81%. Secondary loan prices, as represented by the weighted average bid price of the Index, increased by 16 bps, closing out the month at 97.07. 

One notable theme in June was the return of risk appetite, as lower-rated credits outperformed. For context, BBs, Bs, and CCCs registered respective returns for the month of 0.72%, 0.87%, and 1.11%. However, YTD performance remains in favor of BB-rated loans, which fared better during April’s declines. 

The primary market was busier this month, as arrangers launched a bevy of new deals, including both refinancings and M&A. Total institutional volume (ex-repricings) hit a four-month high of $44.1 billion. In addition, repricings returned after a two-month reprieve given the volatility-induced weakness experienced in April, with roughly $28 billion of loans repriced during the month. On the demand side, CLO issuance remained healthy at $15.4 billion, although it downshifted from the robust pace seen last month at over $20 billion. YTD supply is nearly tacking last year’s record pace at roughly $100 billion. Retail inflows were a modest $250 million, which brings the consecutive streak of inflows to 2 months. However, YTD flows remain negative given April’s sizable outflows. 

Traditional default activity increased in June following the default of Altice France, which is a large issuer within the Index. As a result, the trailing 12-month default rate by principal amount moved up to a still modest 1.11%, from 0.74% in May. Including LMEs, the loan default rate ended the month at 4.46%, slightly up from 4.36% in May, but still off the recent high of 4.7% from December 2024.

index stats

Source: Pitchbook Data, Inc./LCD, Morningstar ® LSTA ® Leveraged Loan Index. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index. *The Index’s average nominal spread calculation includes the benefit of base rate floors (where applicable)

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Unless otherwise noted, the source for all data in this report is Pitchbook Data, Inc/LCD. Pitchbook Data/LCD does not make any representations or warranties as to the completeness, accuracy or sufficiency of the data in this report. 

1. Assumes 3 Year Maturity. Three-year maturity assumption: (i) all loans pay off at par in 3 years, (ii) discount from par is amortized evenly over the 3 years as additional spread, and (iii) no other principal payments during the 3 years. Discounted spread is calculated based upon the current bid price, not on par. Please note that Index yield data is only available on a lagging basis, thus the data demonstrated is as of September 13, 2024. 

2. Excludes facilities that are currently in default. 

3. Issuer default rate is calculated as the number of defaults over the last twelve months divided by the number of issuers in the Index at the beginning of the twelve-month period. Principal default rate is calculated as the amount defaulted over the last twelve months divided by the amount outstanding at the beginning of the twelve-month period. 

General Risks for Floating Rate Senior Loans: Floating rate senior loans involve certain risks. Below investment grade assets carry a higher than normal risk that borrowers may default in the timely payment of principal and interest on their loans, which would likely cause the value of the investment to decrease. Changes in short-term market interest rates will directly affect the yield on investments in floating rate senior loans. If such rates fall, the investment’s yield will also fall. If interest rate spreads on loans decline in general, the yield on such loans will fall and the value of such loans may decrease. When short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on senior loans, the impact of rising rates will be delayed to the extent of such lag. Because of the limited secondary market for floating rate senior loans, the ability to sell these loans in a timely fashion and/or at a favorable price may be limited. An increase or decrease in the demand for loans may adversely affect the loans. 

This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) changes in laws and regulations and (4) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors. 

Past performance is no guarantee of future results.

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