Invesco - Mon, 02/05/2024 - 06:13

2024 US Loan Market Outlook

Summary:

• 2023 was an exceptional year for loan returns (second highest on record) on both a relative and absolute basis, driven primarily by robust coupon that is near all-time highs1 

• We expect 8% loan returns in 2024,2  again powered by strong carry partly offset by expected price erosion at the lower end of the credit quality spectrum 

• We forecast a 3.75% - 4.25% default rate in 2024 driven by a combination of maturity and liquidity challenges, but which are largely already priced by the market

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1 Credit Suisse Leveraged Loan Index as of December 31, 2023. 

2 There is no guarantee that the forecast will be realized. Forecast is based on coupon plus wider nominal spreads minus base rate declines minus price erosion.

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