2020 Sector Outlook: Bank Loans

Markets appear to expect the Federal Reserve to hold interest rates steady during 2020. In this environment, we think the outflows seen in leveraged loan mutual funds are likely to abate, and possibly change directions.

At the time of this writing, many bank loans are priced at a discount to par and currently offer attractive yields. We think these conditions could increase interest in an asset class often thought of only as an up-rate bet.

The majority of bank loan maturities remain pushed out to 2024 and beyond, so we think it’s unlikely that default rates will materially increase in 2020.

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