Bank loan funds see record outflows as CLO bid wavers

By Paul A. Harris

Portland, Ore., Dec. 21 – Observers in the leverage markets are acutely dialed into the negative sentiment which has taken hold in the bank loan market, from which cash is lately flowing out at a record pace, sources say.

The combined bank loan funds sustained a whopping $3.3 billion of outflows in the week to Wednesday’s close, according to a market source, who was citing numbers reported by Lipper US Fund Flows.

It was the fifth consecutive week in which outflows from the bank loan funds topped $1 billion.

That hemorrhaging continued apace on Thursday, during which the loan funds saw daily outflows of $765 million, the source said.

The leverage markets are rife with rumors of liquidations.

Negative sentiment, taking place against a backdrop of late-year low liquidity, has muted CLO issuance, according to a trader, who added that this toxic combination prompted some managers to undertake some forced selling ahead of possible redemptions.

Prices in the leveraged loan index have declined apace, the trader said.

At Tuesday's close the index was priced at 95.44, down from 99.07 on Oct. 5, the source added.

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