Leveraged Loans See Best Quarter Since 2010
- Fed flip to dovish, fund outflows led to shift away from loans
- Corporate bonds perform much better than floating-rate assets
Photographer: John Taggart/Bloomberg
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U.S. leveraged loans just had their best quarter since 2010, despite lackluster performance in March. The floating-rate asset class has returned about 4 percent year-to-date, trailing both investment grade and high-yield bonds.
Most of the first quarter’s robust leveraged loan return came from a January rally that followed a steep sell-off in December. As the Federal Reserve signaled a more dovish monetary policy, investors turned away from floating-rate leveraged loans, which they had been buying as a hedge against rising rates.