LONDON (Reuters) – European secondary loan prices fell to fresh record lows on Thursday as credit markets remained under pressure despite aggressive interest rate cuts in Europe.
Average bids on Europe’s top 40 leveraged loans fell by another 11 basis points (bps) to new record lows of 61.94 percent of face value, RLPC data shows. Average bids have fallen 66 bps since Friday, according to the data.
Trading remained subdued after the market absorbed most of the 420 million euro ($530 million) portfolio of leveraged loans that was auctioned by Royal Bank of Scotland on Wednesday afternoon.
Traders close to the auction said that around 70 percent of the portfolio had traded. Bids were received from 35 different banks and institutions and 24 accounts bought at least one name, they said.
The LevX series 3 senior index of leveraged loan credit default swaps settled at new record lows of 77.20 on Thursday, slightly lower than Wednesday’s close at 77.28 as investors turned to the more liquid iTraxx Crossover index.
“When it’s so volatile (the index) gets really illiquid. You can get caught out as one trade can move the LevX by a point or so and people are migrating over to the Crossover,” one trader said.
The iTraxx Crossover index, made of 50 mostly ‘junk’-rated credits, remained at over the 1,000 bps mark in late afternoon trade, Markit data shows. ($1=.7925 euros)
(Reporting by Zaida Espana; Editing by Greg Mahlich)