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FICC Focus
Leveraged Loan, CLO Outlook 2025, US vs. Europe: Credit Crunch
Jan 15, 2025
Desmond English, Head of European Leveraged Loans at Amundi, shares his expertise on the evolving landscape of leveraged loans and CLOs. He discusses the contrasting performance of U.S. and European markets, emphasizing trends in loan pricing and default rates. The conversation reveals the significant role CLOs play in driving loan supply and tackles the impact of monetary policy on market dynamics. English also addresses liquidity challenges and the future outlook for loans, highlighting expected growth and investment opportunities heading into 2025.
47:44
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Quick takeaways
- Leveraged loans have shown remarkable resilience in the fixed-income market, outpacing high yield bonds and maintaining stable positive returns even in downturns.
- The disparity in credit quality between US and European leveraged loans highlights the stronger market structure in the US, offering investors higher-rated options and greater stability.
Deep dives
Performance of Leveraged Loans
Leveraged loans have consistently outperformed other credit asset classes, including high yield bonds, showcasing their robust returns. In 2022, despite a downturn in most fixed-income sectors, leveraged loans managed a slight positive return, highlighting their resilience during challenging times. This performance trend is attributed to their reliable carry dynamics, with loans outperforming investment grade debt significantly over the past years. The consistent total returns underscore that leveraged loans have effectively fulfilled their role as a carry product, making them an attractive option for investors.
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