Morningstar, Inc. Commentaries
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.