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In This List

European leveraged loan returns stall in May, though best high yield, equities

Outflow streak hits 30 weeks as leveraged loan funds see $686M withdrawal

Despite aging credit cycle, near-term spike in leveraged loan defaults unlikely

Investors withdraw $1.5B from US leveraged loan funds as outflow streak hits 29 weeks

US leveraged loan default rate remains stubbornly low in May


European leveraged loan returns stall in May, though best high yield, equities

The European leveraged loan asset class lost steam in May, returning a slim 0.22% amid choppy economic conditions early in the month.

The performance is down from a 0.78% advance in April, and leaves the YTD return in the segment at 2.58%. That's the most for any comparable period since 2015, and is up from 1.33% last year.

Despite the relatively lackluster performance last month, European leveraged loans fared better in May than other asset classes tracked for this analysis. 

Ongoing U.S./China trade war jitters, coupled with a dip in overall investor demand, forced the U.S. leveraged loan segment in May to give back some of April's healthy gains. Indeed, the S&P/LSTA Leveraged Loan Index lost 22 bps last month, following a 1.65% gain in April, making it the worst month so far this year (loans lost 0.17% in March).

Meanwhile, European high-yield bonds tracked by the Merrill Lynch European High-Yield Bond Index dipped into the red for the first time this year, losing 1.5%, after having gained more than 6% in the first four months of 2019. European equities, meanwhile, underperformed all the other asset classes that LCD tracks, losing 3.46% in May (this is the first negative reading for this segment since losing 3.61% in December.) As a result, European loans was the only asset class in the black in May, out of all the asset classes that LCD tracks for this analysis.

For the year through May, however, European loans continued to lag by a wide margin in terms of returns, and are up 2.64%. This compares with returns of more than 5% for U.S. loans and European high-yield bonds, and more than 6% for European equities.

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.