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Loan investors are betting on rates to stay high longer
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Continued signs of US economic resilience have led economists to scale back the timing and extent of any rate cuts.
PHOTO: REUTERS
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Investors are pouring money into US leveraged loan funds, fuelling some of the biggest gains in credit markets this year, in a high-conviction bet that interest rates will be slow to fall and junk-rated corporate America will withstand the pressure of elevated borrowing costs.
Leveraged loans have gained 2.52 per cent this year, outpacing junk bonds and investment-grade corporate debt as investors flocked to the sector. The Invesco Senior Loan ETF, the largest passive floating-rate vehicle backed by risky debt, had US$2.6 billion (S$3.5 billion) of inflows in the past five months alone, the longest streak since at least 2019.
