ETFs Spur Loan Volatility as Funds Attract Cash: Credit Markets

Leveraged loans are becoming more volatile as they attract unprecedented cash from investors seeking debt that offers protection from rising interest rates.

Loan prices have swung 11.92 cents on the dollar since the end of 2010, compared with a 1.5-cent fluctuation in the three years ended Dec. 31, 2006, according to the Standard & Poor’s/LSTA Leveraged Loan 100 index. Mutual and exchange-traded funds that focus on the floating-rate debt have attracted about $45.5 billion of new money this year, increasing their assets by 60 percent, according to Bank of America Corp.