Senior Loan Talking Points
Managing Director, Head of Bank Loans and Global CLOs
Weekly Notables
Risk assets rallied following the announcement of a two-week ceasefire between the US and Iran, which raised hopes that the Strait of Hormuz would reopen and ease supply concerns that have spiked oil prices. The U.S. loan market, as represented by the Morningstar LSTA US Leveraged Loan Index (Index), delivered a strong return of 0.41% for the seven-day period ending April 9, as the average Index bid price gained 26 basis points (bps), ending the week at 94.89.
In the primary market, issuance was muted as borrowers and investors were cautious given the uncertainty around the conflict and the perceived fragility of the truce. As a result, just two new deals were launched this week, both of which were add-ons to existing facilities. Net of approximately $22.7 billion of anticipated repayments that aren’t associated with the forward calendar, repayments now outstrip supply by $10.85 billion, up from $5.9 billion last week. That increase in net repayments is a reflection of both the light new-issue calendar and a net increase in expected loan repayments that have been fueled by a few IPO launches.
In the secondary market, average trading levels firmed notably this week, but dispersion remained a key theme. Across ratings, CCCs modestly outperformed, although this was a function of their higher income carry, as the rally in their average bid price failed to keep up with higher-quality cohorts.
The CLO market remained quiet, as just one new deal was priced this week, bringing YTD issuance to $47.4 billion. Outflows from retail loan funds eased this week, as Morningstar reported a modest net redemption of $23 million for the week ending April 8. This follows last week's withdrawal of $45 million and marks the eleventh consecutive weekly outflow.
There were no defaults in the Index this week.
Source: Pitchbook Data, Inc./LCD, Morningstar LSTA US Leveraged Loan Index. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index. *The Index’s average nominal spread calculation includes the benefit of base rate floors (where applicable).
Monthly Recap: March 2026
March marked a clear turning point for markets, as the war with Iran moved from a developing risk into the dominant macro driver. As hostilities intensified and the risk of supply disruption through the Strait of Hormuz became more salient, markets quickly shifted from a narrative centered on AI disruption to one focused on geopolitics, energy and inflation. In terms of economic data, following a significant upside surprise in the prior month’s payroll report, the February nonfarm payrolls release (reported in March) showed a steep 92,000 decline, suggesting that momentum in the labor market may already be cooling, even before any slowdown from supply-side shocks are realized. Financial markets reflected this evolving balance: credit spreads continued to widen as risk appetite softened, while rates reversed the February decline and began to rise in response to the inflationary implications of the conflict and higher energy prices. In combination, these crosscurrents reinforced a more cautious tone into quarter-end, with investors increasingly demanding compensation for both growth uncertainty and renewed headline-driven inflation risk.
Despite the increase in broader market volatility, the U.S. loan market traded in more stable fashion during the month of March compared to other asset classes. The average Index bid price increased by 4 bps month-over-month, finishing the period at 94.63 after declining by 116 bps and 89 bps respectively in the prior two months. Overall, the Index returned 0.54% for the month, while the market value component of return was slightly negative at -0.07%. Despite the solid headline number, the loan market remained bifurcated beneath the surface, with dispersion evident across sectors, ratings, and maturity cohorts. By ratings, Single-Bs posted their first outperformance versus BBs since December, while CCCs continued to lag higher-quality credits. Across sectors, energy-sensitive sectors, such as building products, containers & packaging, and household durables underperformed, while healthcare-oriented sectors, capital markets, and insurance were positive outliers during the period. The software space was more stable in March following two months of notable weakness.
Primary market activity increased in March to $33 billion, primarily due to a pickup in a few mega LBO deals that have been well telegraphed. However, repricing transactions were non-existent in March, marking March as the first month since April 2024 without any repricing activity. CLO issuance remained healthy at $17.6 billion, although it moderated from last month’s strong pace, as formation was lighter in the last two weeks of the month amid wider CLO liabilities. The current YTD tally is slightly off 2025’s data for the comparable period but remains strong at $47 billion across 99 deals. The retail segment continued to experience redemptions in March, as LCD reported $3.3 billion of outflows for the month, bringing YTD outflows to $7.5 billion.
In March, traditional default activity increased, with 2 Index payment defaults experienced during the month (Trinseo and New Fortress), both of which completed LME transactions in the past 15 months, and one new LME default. As a result, the trailing 12-month default rate by principal amount modestly increased to 1.44% from 1.38% in February, while the dual-rate tracker that also includes LME activity eased to 3.48% (from 3.54% last month), with a few LMEs rolling off the trailing tally.
Source: Pitchbook Data, Inc./LCD, Morningstar LSTA Leveraged Loan Index. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index. *The Index’s average nominal spread calculation includes the benefit of base rate floors (where applicable).