KIO - Why Floaters Look Attractive Despite Lowered Rate Expectations
We've discussed leveraged loans (also called floating rate or senior loans) quite a bit on this site. At the end of the third quarter, floating rate was the best asset class in the fixed income space with a mid-single-digit gain. However, by the end of the fourth quarter, aided by some media-induced panic, the floating rate ETF was down nearly 5.50%.
The index sits just over $94, which implies a hefty 27% default rate. While the market itself is not small at $1.3 trillion, the defining characteristic is fund flows which tend to drive prices.