Lpc european secondary loan market holds after trump victory

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Nov 9 Europe's leveraged loan market rattled slightly on news of Trump's presidential victory with paper dipping in the secondary markets in early morning trading before bouncing back as investors held on to assets and demand continued to outweigh supply, banking sources said on Wednesday. Bids on Europe's secondary loan market softened by 50bp-100bp first thing on Wednesday morning but regained any losses by mid-morning. The offer side remained unchanged. The European loan market has been plagued by technicals, flushed with cash from CLO and credit fund issuance but limited by relatively low event-driven financings."Initially the market was nervy. Bonds were off and loans were bid lower, oil was lower and gold was higher. There was risk off, safe haven type moves. But it was a very short lived reaction. The loan market is back to form with demand outstripping supply and people chasing paper," a loan and bond investor said. A number of investors and traders were hoping to pick up some bargains on Wednesday morning but were faced with a lack of supply, as people held onto paper and were reluctant to sell.

There were similarities in the immediate aftermath of Britain's vote to leave the European Union in June, when the bid-offer spread widened as traders showed a willingness to buy into market weakness, but investors remained unwilling to sell."There was bargain hunting early doors but there were no bargains to be had. We were hoping there would be a lot of supply and dumping but that hasn't happened," the investor said.

A European syndicate head said: "Equities are down, crossover is flat. Loans are still well bid, bonds are down half a point but buyers are circling. Investors are hoping for a market puke to pick up names cheaper, but that is not happening yet. Time will tell."WAIT AND SEE

The European market is looking to the US market to see what direction that takes. While many bankers still plan to press ahead with primary loan launches, there could be some delay while the market digests the news. There could also be some changes in pricing and banks will be assessing underwriting risk for a swath of pipeline buyout deals. There may also be some delay to CLO issuance, but they are unlikely to be pulled, a European head of leveraged finance said."Europe will take its guidance from the US and at the moment it doesn't feel like it is going to fall out of bed. There will be a short period of uncertainty where people will wait to see. As a result you probably won't get a repricing launched this week as lenders will want some confidence that the market is there," a second European loan syndicate head said."Arrangers will not take an underwriting decision today or tomorrow but the European market will stay driven by technicals and that will remain unchanged."