(Bloomberg) -- US leveraged loans are on track to post their first monthly losing streak since 2022, a rare slide for a market that had been benefiting from investor demand for floating-rate debt.
The sector has posted a 0.24% loss this month through Tuesday, according to the Bloomberg US Leveraged Loan Index, after declining 0.29% in March. The downturn, though, follows 21 consecutive months of gains during which the average return was 0.84%.
Leveraged loans were one of 2024's best-performing credit sectors, climbing about 9%, with investors flocking to the asset class as the Federal Reserve's policy easing has trailed the likes of the European Central Bank. But sentiment began to turn in March as US tariff policy raised concerns throughout markets.
That was amplified this month, with the April 2 announcement by President Donald Trump fueling tumult globally that included the biggest two-day plunge in secondary-market prices for leveraged loans as fund outflows set a weekly record. Investors have pulled a combined $12.6 billion from the sector since early March, according to LSEG Lipper data, pushing total assets down to $96.9 billion.
As cash left, the leveraged loan market underwent 14 straight trading days without a new deal — the longest since Bloomberg started tracking broadly syndicated loan launch data in 2013. There's been just $8.7 billion of new transactions in April — including a deal announced Wednesday — currently the seventh-slowest month in the data series. That weakness is part of a primary-market slump in US leveraged finance.
The only monthly losing streaks for the Bloomberg leveraged loan index, which is backdated to 2019, were in early 2020 when the Covid-19 pandemic began and spring 2022 as the Federal Reserve was sharply increasing its policy rate. The gauge has yet to fall for three straight months.
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