A larger number of trades fell within a close range of their mark-to-market price compared to last year, according to a Loan Syndications and Trading Association's first quarter 2006 trade data study, which compares the price credits trade at to average mark-to-market prices. Trade data was collected on 1,188 credits. This is the first year the LSTA has published a quarterly study; the association has increased the frequency from annually to quarterly in a bid to provide more frequent insight into the accuracy of indicative secondary prices.
The study found 84% of par and distressed trades fell within 50 basis points of their mark-to-market price in the first quarter, up from 79% for the whole of last year and 52% in 2004. The LSTA did not break down its study on a quarterly basis last year so there are no equivalent quarterly comparisons.
In the first quarter, 7% of all par and distressed trades were wider than 100 basis points of their mark-to-market pricing; this compares to 9% in 2005 and 28% in 2004. The trade group further broke down its figures to show that 87% of par trades occurred within 50 basis points of their mark-to-market price this year, compared with 81% last year.
For distressed loans priced below 90, 46% of facilities traded within 50 basis points of their mark-to-market price during the first quarter, up from 35% last year. The study found a number of distressed facilities had a weak relationship between their trade price and mark-to-market price.
The research also revealed that liquidity in the secondary market continues to improve. For the third year in a row the secondary is becoming more liquid as the percentage of facilities trading one to four times has decreased, while the portion of loans trading more than 20 times has increased. The study found 37% of credits traded between one and four times, down from the 41% reported last year, while credits that traded more than 20 times represented 25%, an increase of 18% last year