The Tide Might Be Starting to Turn for Leveraged Loans

Leveraged loans have been a strong performer in credit markets, outperforming high yield bonds. However, recent trends indicate a potential shift, with increased short interest in major ETFs and significant outflows. Rising interest rates, exemplified by the surge in Libor, are increasing yields for investors but also raising concerns about the creditworthiness of companies. This creates a complex scenario for investors, balancing higher returns with potential risks.

What has been a standout performer in the credit markets this year?

• High yield bonds

• Leveraged loans

• Government bonds

• Corporate bonds

What significant trend has been observed in the KLM leveraged loan ETF?

• Stable short interest

• Increase in short interest

• Decrease in short interest

• No short interest

What is the relationship between rising interest rates and leveraged loans?

• Rising rates decrease loan yields

• Rising rates increase loan yields

• Rising rates make loans risk-free

• Rising rates have no effect

How has the three-month U.S. dollar Libor rate changed recently?

• It has surged to a new high

• It has remained stable

• It has decreased

• It has become negative

What is a potential risk for investors as companies offer higher returns due to rising rates?

• Companies become more creditworthy

• Companies become less creditworthy

• Investors receive lower returns

• Investors face no risks