State of the Loan Market (First of a Series)

The French are running out of butter. C’est impossible!

Bad weather, falling milk production, and revived global demand for the dairy product have left bare shelves in France, particularly Brittany. This in a nation where consumers eat three times as much butter annually (18 lbs. per capita) as in the US.

L’affaire du beurre (a.k.a. BeurreGate) has caused stockpiling, pushing butter prices up sharply from $2,800 per ton in April 2016 to $8,000, according to the NY Times. A ton of butter is challenging to wrap your brain around. Unless you’ve eaten a croissant.

Issues of supply and demand were also much on the minds of attendees of the 22nd Annual LSTA Conference. The Loan Sales and Trading Association is the industry’s marketing and advocacy organization. Its members represent the breadth and depth of the loan market, with an emphasis on liquidity, tradability and documentation.

A number of themes arose in the primary market discussion, none surprising. Loan volume has continued at a record pace, with activity so far this year at $436 billion for the overall market (per S&P LCD). A significant share of these transactions are refinancings, though that share declined from 80% at the start of 2017 to just below 30% today.