Financial Professionals


How the Fed’s Rate Announcement Relates to Senior Floating Rate Bank Loans


The Fed expects to keep short-term interest rates near zero until at least mid-2015. While LIBOR will continue to remain depressed, high credit spreads and LIBOR floors continue to result in attractive dividend yields in bank loan funds relative to other fixed income asset classes.  Roughly 60% of the loan market carries a LIBOR floor, with the average floor around 1.25% (compared to 0.25% for actual 3M LIBOR).The bank loan market is effectively “pulling forward” the eventual rise in interest rates, resulting in a benefit today.

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.