U.S. loan funds are poised to set a record for the biggest increase in assets in a single month after posting the 36th consecutive week of inflows, according to Bank of America Corp.
Investors added $910 million this week to the funds that purchase floating-rate debt made to the neediest companies, bringing the monthly total to $3.7 billion on the back of two record-setting weeks, the Charlotte, North Carolina-based bank said in a report yesterday. The funds would surpass the $4.4 billion monthly inflow high set in January with another $700 million added next week.
Loan funds have advanced as investors reduce their holdings of high-yield bonds, resulting in a fourth-straight week of outflows, mostly from exchange-traded funds that invest in the debt, according to the Bank of America report.
The average yield on loans has dropped 8 basis points since the end of last month to 5.99 percent, the least since Jan. 24, JPMorgan Chase & Co. data show. That’s just 0.03 percentage point from the lowest level recorded on the index since its 2007 inception. A basis point is 0.01 percentage point.
The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index, which tracks the average bid price on the 100 largest dollar-denominated first-lien leveraged loans, has increased for seven straight trading days to 97.42 cents yesterday.
Leveraged loans are a form of high-risk debt that carry ratings of less than Baa3 by Moody’s Investors Service and below BBB- by S&P.