Senior Loan Talking Points
Managing Director, Head of Bank Loans and Global CLOs
Weekly Notables
The broader market posted positive returns this week after opening the week on a softer tone, as prospects for a December Fed cut continue to increase. Key stock indices rose, while credit spreads modestly tightened across fixed income sectors. The positive tone was felt in loans, as the weighted average bid price of the Morningstar LSTA US Leveraged Loan Index (Index) rose by four basis points (bps) for the seven-day period ended December 4. The Index registered a positive return of 0.18%.
The primary market is set for a final push before year end, with $17.4 billion in deal announcements this week, marking the busiest week in four months and higher than November’s full month total. In the forward calendar, net of approximately $6.85 billion of anticipated repayments that aren’t associated with the forward pipeline, repayments outstripped net supply by roughly $4.9 billion. In the prior week, net expected supply was $5.3 billion. Technicals are expected to remain supportive through the balance of the year. Earnings for loan issuers continue to trickle in as we approach the end of the reporting cycle. Demand continues to be strong across ramping CLOs, open warehouses and some institutional activity.
In the secondary market, trading levels remained subdued despite solid M&A activity and the announcement of new deals. From a quality standpoint, higher quality outperformed with BB and Single-B rated loans returning 15bps, while CCCs returned negative 0.08%.
CLO primary markets were active post the Thanksgiving holiday, as managers priced 7 new deals this week with the YTD tally expanding to roughly $196 billion. US retail loan funds reported a modest inflow of $40 million, according to Morningstar, returning to positive territory after two consecutive weeks of outflows.
There were no new defaults in the index during the week.
Source: Pitchbook Data, Inc./LCD, Morningstar LSTA US Leveraged Loan Index. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index. *The Index’s average nominal spread calculation includes the benefit of base rate floors (where applicable).
Monthly Recap: November 2025
The US loan market, as represented by the Morningstar LSTA US Leveraged Loan Index, returned 0.36% in November, which is a modest improvement over October’s muted gain of 0.22%. However, secondary prices continued to move lower, as coupon income offset market value declines for a fourth consecutive month. The average Index bid price decreased by 21 bps in November, closing out the period at 96.46, which is the lowest month-end reading since April. The softness was driven by continued underperformance of chemicals and building products sectors, ongoing weakness in CCC-rated credits, and weaker broader market backdrop given concerns around an AI bubble. Bifurcation across issuers remained a key theme, as the share of loans priced below 90 was 9.70% – the highest level since late April – and the par-or-higher cohort approached 50%. Across ratings, CCCs continued to materially underperform, while BBs and Single-Bs both outperformed the broader market.
New-issue activity declined in November given the weaker secondary market, as a handful of deals were pulled and a few required investor concessions to get across the finish line. However, repricing activity saw a modest improvement, as $19.5 billion was repriced through amendments, primarily from stronger-rated borrowers, up from just $11.5 billion in October. Net of repricing activity, total volume was a modest $15.9 billion, with the decline driven by lower refinancing transactions. This segment only amounted to $2.7 billion in November, mostly from a few small add-on deals, while the remaining activity was primarily tied to M&A and dividend recaps. YTD supply (excluding repricings) is currently tracking $413.5 billion (down 13% from last year’s pace). Much of the shortfall represents lower refinancing activity, as M&A supply has improved in 2025. On the other hand, measurable investor demand remained healthy due to strong CLO issuance, which increased to $21.4 billion across 45 deals, representing the second-busiest month of the year thus far. YTD issuance has now eclipsed $192 billion and is running slightly ahead of last year’s pace. Meanwhile, retail loan funds continued to experience outflows, although to a lesser degree compared to October. For context, LCD reported $789.6 million of net outflows for the month.
There was one payment default in November (Klockner Pentaplast). However, the traditional trailing payment default rate by principal amount fell by 21 bps to 1.25%. Furthermore, LCD’s dual-rate tracker that includes liability-management exercise (LMEs) continued to decline, hitting a 2-year low of 3.68% at the end of the month, with just one LME default reported during the period and a few rolling off.
Source: Pitchbook Data, Inc./LCD, Morningstar LSTA Leveraged Loan Index. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index. *The Index’s average nominal spread calculation includes the benefit of base rate floors (where applicable).