Warmongering central banks send leveraged loan prices to near 15-year highs

A view of the Federal Reserve Building in Washington, September 16, 2008. REUTERS/Jim YOUNG/File Photo

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  • US leveraged loan prices hit highest level since 2007
  • Upcoming rate hikes strengthen the case for floating rate assets
  • Loan inflows recently hit their highest level since 2013 – Refinitiv Lipper

Jan 20 (Reuters) – U.S. leveraged loan prices hit their highest levels since 2007 as investors grab assets offering compensation as central banks embark on a bullish cycle rates.

Leveraged loans are often taken out by highly indebted companies, usually with lower quality credit ratings and are often used by private equity firms to finance their acquisitions of these companies.

Unlike bonds, they pay a floating interest rate, which rises as underlying interest rates rise, making them attractive to investors at a time when central banks are embarking on rate hikes. .

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This has exacerbated the need to acquire assets that pay as rates rise, sending the price of the S&P/LSTA Leveraged Loan Index to its highest level since July 2007 at 99.066 at Wednesday’s close. , according to data from Refinitiv and S&P Global’s Leverage Commentary. and Data.

Investor inflows also increased, with loan funds seeing the highest inflows since 2013 at $1.84 billion for the week ending Jan. 12, according to data from Refinitiv Lipper.

As inflation hits 40-year highs, Federal Reserve officials announced they would start raising U.S. interest rates as early as March, with investors expecting four rate hikes this year.

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Reporting by Yoruk Bahceli; Editing by Saikat Chatterjee

Our standards: The Thomson Reuters Trust Principles.

Dorothy H. Lewis