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Morningstar, Inc. Commentaries

Where Do Bank-Loan CEFs Go From Here?

May 16, 2014
Click here to access Where Do Bank-Loan CEFs Go From Here?

We've written about the pros and cons of bank loans before, but the space is worth revisiting given the uncertainty facing floating-rate investors.

Bank loans (also known as floating-rate loans or senior loans) feature rates that regularly reset to a spread over Libor and are relatively immune to price changes driven by changes in broad-market interest rates. While interest-rate risk is minimal, borrowers (or issuers) in this market tend to have highly leveraged balance sheets. 

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