Bank Loan Spreads Offer Dynamic Opportunities

Time after time, fixed income investors have faced the difficult decision of choosing between bank loans or high yield bonds. 

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The general wisdom for this debate has been that bank loans can carry lower risk than high yield bonds. However, with lower risk comes lower potential for upside. 

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Broadly speaking, high yield bonds brought in strong results through 2024. That being said, bank loans may be viewed as a more attractive opportunity for the new year.

In the December edition of “The BEAT”, the team at Eaton Vance broke down the benefits that bank loans may offer going forward. Specifically, the Eaton Vance team highlighted how spreads for bank loans have not tightened as much as other fixed income asset classes.

“Bank Loan spreads have not tightened as much as other risky segments of fixed income markets, leading to a pocket of strong relative valuation that we believe can be exploited,” the Eaton Vance team noted. “Bank Loan discount margins versus High Yield spreads are approaching all-time highs for multiple rating segments of the market. As such, we are shifting some of our credit exposure from High Yield to Loans.”

EVLN Provides Robust Bank Loan Exposure

Investors wishing to bolster their exposure to bank loans may wish to consider opting for the Eaton Vance Floating-Rate ETF (EVLN). This fund offers access to an actively managed selection of diversified bank loans. 

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EVLN’s distinct bank loan strategy has resulted in the fund receiving consistent fund flows throughout the year. In October, EVLN passed the $1 billion threshold in assets under management, despite its release less than a year ago.

See More: EVLN’s Floating-Rate Loan Strategy Hits $1 Billion in AUM

The fund’s attractive results can help illuminate why investors are continuing to opt for the Eaton Vance strategy. As of December 23rd, 2024, the fund has a 30 day SEC yield of 7.52%. 

For more news, information, and analysis visit The ETF Yield Channel.