May 23, 2025 - As market volatility spiked higher in April, LSTA secondary loan trading volume surged again above $100 billion.  April activity ran north of $109 billion, a 6% increase over March’s $103 billion and 47% above the $70 billion LTM average (through February).  March and April activity marked the second and third busiest months ever in the loan market; only trailing the record setting $119 billion of March 2020 (the onset of COVID).  And let us not forget, February 2025 had previously held the number two spot at $82 billion.  To put that run-rate in better perspective, annualized trade activity (through April) would balloon to a full-year figure of $1.1 trillion – 34% higher than 2022’s record of $824 billion.

Now on to the topic of volatility, where loan prices fell precipitously following President Trump’s so called “Liberation Day” tariff declaration on April 2nd; only to rally back (somewhat) through month-end.  The market found its bottom a few days after the President’s 90-day pause announced on April 9th.  All told, average (96.3) and median (98.2) trade prices fell 102 and 134 basis points respectively across April, marking two-year lows.  From a trade activity standpoint, par-plus market share declined to just 8%, 21 percentage points lower month-over-month and a staggering 51 percentage points down from January’s high-water mark of 59%.   For the second month running, most trade activity took place in the 98 to sub-100 price range, at 48% of activity (up from 44%), but market share within the 90 to sub-98 price range doubled to 33%.  On a positive note, activity in the sub-90 price range remained unchanged at 11%, after widening out just two percentage points since year-end.

As prices moved lower across the secondary, bid-ask spreads (based on LSTA/LSEG MTM bid and ask values on the traded universe of loans) gapped out to two-year wides with the average and median spreads expanding 28 bps (to 98 bps) and 38 bps (to 88 bps), respectively.  But looking at month-over-month changes doesn’t speak to the actual volatility (and trade activity) witnessed across the lion’s share of April’s daily trading sessions.  Incredibly, four of the top five most active trading days occurred during April (at an average of $8.9 billion per day) with April 4th coming in at a record setting $10.9 billion.  Now on to that daily volatility, where from peak (April 3rd) through trough (April 11th), average daily trading levels ranged from a high of 97.5 to a low of 95.5, with the last session of April coming in at 96.8.  Even more telling, the “absolute” daily change in the market’s average trade price totaled 70 basis points per day, with the largest negative move at 123 bps (April 4th) and largest positive move at 135 bps (April 21st).

All told, the secondary market now finds itself a bit softer than when it started the year, with average and median trade price levels down 166 and 198 bps, respectively.  But that said, loan yields (which remained enticing even after the refinancing wave of 2024, and more so after the recent bout of volatility), will continue to remain attractive for the foreseeable future given the higher-for-longer rate environment.  That was evident in April, when prices quickly rebounded off their lows, but of course CLOs played a large role in setting a market bottom.  Case in point, continuous outflows from loan mutual funds and ETFs were counterbalanced by a strong CLO bid – through a combination of existing warehouses and new print and sprint activity.