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Q3 2016 loan market data snapshot IHS Markit
October 3, 2016
Contents
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Q3 2016 IHS Markit loan market data snapshot
• Index trend
• Pricing trend
• Sector trend
• ETF asset flows
• CLO trend
• Trade settlement efficiency (T+) trend and trade settlement volume
Index trend Q3 2016
3
-5.00%
-3.00%
-1.00%
1.00%
3.00%
5.00%
7.00%
9.00%
11.00%
13.00%
Markit iBoxx USD Liquid Leveraged Loans Index Markit iBoxx USD Leveraged Loans Index Markit iBoxx USD Liquid High Yield Index
Markit iBoxx Loan Indices Q2Δ% YTD return
Markit iBoxx USD Leveraged Loan Index 3.26% 7.90%
Markit iBoxx USD Liquid Leveraged Loan Index
3.03% 7.51%
Leveraged loan and HY bond total returns 2016
Pricing data Q3 2016
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Region Average bid QTD ∆ YTD % ∆
US 94.26 1.70% 1.77
Europe 93.29 1.27% -0.07%
Asia 87.25 2.68% 3.57%
Average loan spreads to maturity (Sept 30)
1 year tenor
3 year tenor
5 year tenor
7 year tenor
BB L+252.8 L+294 L+327.4 L+364.4
B L+466.4 L+507.6 L+541 L+578
CCC L+888.5 L+929.7 L+963.2 L+1000.1
Average loan spreads Q3 2016 ∆
1 year tenor
3 year tenor
5 year tenor
7 year tenor
BB 4.53% 2.12% 2.31% 4.32%
B -4.73% -5.25% -4.73% -3.20%
CCC -3.11% -3.47% -3.22% -2.39%
Pricing trend: average spreads by credit rating (globally)
Pricing trend: average bids in the secondary market
Sector view – Q3 2016
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BBB- BB+ BB BB- B+ B B- CCC+
Basic Materials NA -32 -21 -37 -46 -59 -74 -89 -132
EU -1 +17 -9 -17 -32 -50 -44 -100
Change NA-EU -31.4 -37.9 -28.4 -29.2 -27.7 -23.8 -44.7 -32.1
Consumer Goods NA -33 -22 -38 -47 -60 -74 -89 -133
EU -2 +15 -10 -18 -33 -51 -46 -101
Current NA-EU -30.6 -37.1 -27.6 -28.4 -26.9 -23.0 -43.9 -31.3
Consumer Services NA -15 -4 -20 -29 -42 -56 -71 -115
EU +15 +32 +7 -1 -16 -34 -28 -84
Current NA-EU -29.8 -36.3 -26.8 -27.6 -26.0 -22.1 -43.0 -30.5
Energy NA +13 +24 +9 -1 -14 -28 -43 -86
EU +47 +64 +39 +30 +16 -2 +3 -53
Current NA-EU -33.2 -39.7 -30.2 -31.0 -29.4 -25.5 -46.5 -33.9
Financials NA -26 -15 -31 -40 -53 -68 -83 -126
EU +6 +24 -1 -10 -24 -42 -37 -93
Current NA-EU -32.8 -39.3 -29.8 -30.7 -29.1 -25.2 -46.1 -33.5
Healthcare NA -28 -17 -33 -42 -55 -69 -85 -128
EU +2 +20 -5 -14 -28 -47 -41 -97
Current NA-EU -30.5 -37.0 -27.5 -28.3 -26.8 -22.9 -43.8 -31.2
Industrials NA -36 -25 -41 -50 -63 -77 -93 -136
EU -5 +12 -13 -21 -36 -54 -48 -104
Current NA-EU -30.8 -37.3 -27.8 -28.6 -27.0 -23.1 -44.1 -31.5
Technology NA -33 -22 -38 -47 -60 -74 -90 -133
EU -4 +13 -12 -21 -35 -53 -48 -104
Current NA-EU -28.8 -35.2 -25.8 -26.6 -25.0 -21.1 -42.0 -29.5
Telecommunication Services NA -42 -31 -47 -56 -69 -84 -99 -142
EU -9 +9 -16 -25 -39 -58 -52 -108
Current NA-EU -33.6 -40.1 -30.7 -31.5 -29.9 -26.0 -46.9 -34.4
Utilities NA -30 -19 -35 -44 -57 -72 -87 -130
EU +4 +22 -3 -12 -26 -44 -39 -95
Current NA-EU -34.7 -41.2 -31.7 -32.5 -31.0 -27.1 -48.0 -35.4
Q3 change in North American and European leveraged loan sector spreads (bps)
North America v Europe basis – Q3 2016
6
North America v Europe syndicated loans basis
North American loans outperformed European loans and the spread basis between the two is at the widest point in over a year, driven in part by post-Brexit uncertainty.
ETF asset flows Q3 2016
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ETF Type 2016 Q3 net asset flow YTD net asset flow Loan $ 1,387,022,797 $ 2,492,514,414
ETF Type 2016 Q2 net asset flow YTD net asset flow HY Bond $ 3,610,636,741 $ 3,936,913,456
$(150)
$(316)
$444
$(71)
$584 $614
$194
$446
$748
$(400)
$(200)
$-
$200
$400
$600
$800
$1,000
Jan Feb Mar Apr May Jun Jul Aug Sept
Millio
ns
Senior Loan ETFs
$(0)
$2
$5
$0
$(2.36)
$(4)
$2
$0 $1
$(5)
$(4)
$(3)
$(2)
$(1)
$-
$1
$2
$3
$4
$5
$6
Jan Feb Mar Apr May Jun Jul Aug Sept
Billio
ns
High Yield ETFs
ETF asset flows Q3 2016
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ETF Type 2016 Q3 ending AUM Q3 % ∆ in AUM YTD % ∆ in AUM Loan $ 7,069,172,975 23.93% 40%
ETF Type 2016 Q3 ending AUM Q3 % ∆ in AUM YTD % ∆ in AUM HY Bond $ 60,389,532,829 11.4% 26%
-2.78%
-6.23%
7.88%
-1.25%
9.36%
1.00% 4.96%
6.88%
10.47%
-0.17%
3.24%
8.61%
0.40%
-4.20%
-3.40%
7.90%
1.75% 1.46%
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Jan Feb Mar Apr May Jun Jul Aug Sept
Asset Flows as % of AUM
Loan Asset Flows as % of AUM High Yield Asset Flows as % of AUM
CLO trend Q3 2016
9
110
120
130
140
150
160
170
180
3 3.5 4 4.5 5 5.5 6
Dis
co
un
t M
arg
in (
DM
)
Weighted Average Life (WAL)
Tier1
Tier2
Tier3
CLO 2.0 AAAs by WAL and Manager Tier
Supply levels in the primary market remain elevated, culminating in ~$40bn from 90 deals compared to ~$75bn this time last year. Liability spreads continue to tighten from AAA to A, supported by strong demand from investors in the secondary and the looming risk retention in December. Investor focus is largely concentrated on shorter duration 2.0 super senior paper on account of rising yields and lower risk. Tier 1 & 2 shorter duration AAAs (2-3 yr WAL) have priced as tight as 125 bps, compared to 140-170 bps for new issue. Spread compression for shorter duration IG tranches will likely continue given the increase in loan prepayments. Manager tiering remains pronounced across the WAL buckets.
Trade settlement volume Q3 2016
10
391.5 355.7
529.8
647.3 628.0
468.2 18.1
19.8
23.0
21.1
19.3 18.7
0.00
5.00
10.00
15.00
20.00
25.00
0
100
200
300
400
500
600
700
2011 2012 2013 2014 2015 2016 (Q3)
Bil
lion
s
Averag
e T
+ (
bu
sin
ess d
ays)
Source: Markit Loan Settlement
236.1 244.4
353.8
475.2
548.3
480.4
18.1
19.8
23.0
21.1
19.3 18.7
0
5
10
15
20
25
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016
(Q3)
Th
ou
san
ds
Source: Markit Loan Settlement
Averag
e T
+ (
bu
sin
ess d
ays)
Average T+ time and LSTA Secondary Par Settled Notional
Average T+ time and LSTA Secondary Par Settled Allocations
Trade settlement efficiency Q3 2016
11
107.6 101.5 100.0
82.4 83.8
96.0
86.0 90.0
109.1
144.3 143.4
133.1 125.6
171.9 174.4 175.5
160.2 154.0
151.5
162.3
152.7
164.6
150.8
17.8
19.3
17.1 18.4
17.2
19.5
21.1 21.2
22.7 23.1
25.0
20.9 21.8
20.2 21.3 21.2
19.6 19.3 20.2
18.2 19.3
17.7 19.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
0
20
40
60
80
100
120
140
160
180
200
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3
2011 2012 2013 2014 2015 2016
Averag
e T
+ (
bu
sin
ess d
ays)
Bil
lion
s
Average T+ time and LSTA Secondary Par Settled Notional by Quarter
Source: Markit Loan Settlement
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2016-08-04
