Treasurers seeking to tap the leveraged loan market prior to the next round of tapering talk have seen some positive signs in recent weeks. In particular, last week (ended October 23) saw retail flows into bank loan mutual funds and exchange traded funds hit $746, up from $474 million the week before, according to Lipper, as reported by Standard & Poor’s Capital IQ/LCD.
The biggest weekly flow was $1.9 billion for the week ending August 7, according to S&P, and lower inflows in more recent weeks have pulled the four week trailing average down to $636 million, from $853 million two weeks earlier, according to S&P.
Despite that, CLOs are booming as institutions seek to position themselves for any potential rate volatility in coming months arising out of expected Fed tapering. S&P says US CLO issuance increased to $1.4 billion in the week ending October 23, and this year’s volume has already surpassed last year’s total of $53.4 billion. Just as they did in the May-June volatility, the short-duration, floating rate markets should continue to see interest if investors pull in their horns around Fed announcements.