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Leveraged loans outperform other asset classes as interest rates rise

Oct. 12, 2018 3:40 PM ETEVF, EFR, VVR, JFR, FCT, BRW, BHL, BSL, PHD, TLI, BKLN, OXLC, AFT, BGX, SRLN, BGB, FTSL, FSLF, ECC, HYSABy: Liz Kiesche, SA News Editor110 Comments
  • With rising interest rates hurting stock and bond prices, there's one asset that's outperforming almost every asset class this month--corporate loans, especially leveraged loans.
  • Leveraged loans have increased to $1.2T this year, exceeding the amount of outstanding junk bonds for the first time, the Wall Street Journal reports.
  • Leveraged loans made to companies with less than investment-grade ratings (or junk) have increased among investors because they pay relatively high interest that moves with benchmark interest rates, thus insulating loans from rate increases by the Fed.
  • Stocks and bonds, meanwhile, have been pulled down by concern over interest rates this week.
  • Though Treasury inflation-protected securities usually rise in value with interest rates, they have actually declined this year because there's been little change in inflation expectations even as the Fed raises rates.
  • ETFs: OXLC, BKLN, ECC, PPR, EFR, BGB, VVR, NSL, BGX, PHD, TSLF, BSL, SRLN, AFT, SNLN, FCT, EVF, FTSL, TLI, BHL

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