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Q1 Seix Market Review & Outlook - Leveraged Finance

Dovish Fed, Rosier Forecasts, and Bullish Yield Chasers

Rising rates and growing demand for higher yields spurred an increase of investment in leveraged loans in the first quarter. The JP Morgan Leveraged Loan Index returned 1.88% with Split B/CCC loans up 6.66%, outperforming B loans (+1.60%) and BB loans (+0.83%). Performance was led by the metals & mining and energy sectors, while laggards included the broadcasting, utilities, and cable/satellite sectors.  

In the high yield market, companies once under intense pressure during the pandemic lockdown were able to raise billions as investors spooked by inflationary expectations dumped Treasuries en masse and reached for yield amid rosier economic forecasts. As a result, the effective yield on the ICE BofA U.S. High Yield Index dropped to 4.25% on April 6, 2021—a stark contrast to March 23, 2020, when the effective yield was nearly 11.4%.

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The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

All investments carry a certain degree of risk, including possible loss of principal.

Past performance is not indicative of future results.