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Q3 Seix Leveraged Finance

Virtus Viewpoints:
As Economy Cools, A Flight to Safety

  • With more and more investors seeking income in an increasingly low rate environment, high-yield bonds (as represented by the ICE BofAML High Yield Cash Pay Index) returned 1.23% in the quarter with BBs (2.05%) outperforming Bs (1.22%) and CCCs (-2.33%). Year-todate, high yield bonds posted gains of 11.51% with BBrated bonds (13.03%), B-rated bonds (11.21%) and CCCrated bonds (6.06%).

  • While high yield bonds were yielding 5.57% by the end of 3Q19, loans were yielding about 6.46%, down 167 basis points (bps) year-to-date.

  • Retail outflows in the leveraged loan sector decelerated again in 3Q19 as collateralized loan obligation (CLO) formation continued to provide support. Mergers and acquisitions (M&A) accounted for the majority of issuance, but issuance to pay down loans remained active, resulting in a number of unexpected calls. And LIBOR levels contracted 20 bps to end the quarter at approximately 2.1%.

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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.

Past performance is not indicative of future results.