Credit markets are surfing on waves of money

Investors seeking yield in corporate loans may be beaten to the punch by loads of cash—even sometimes from special-purpose acquisition companies, or SPACs, and ordinary banks.

The prospect of inflation and rising rates is making floating-rate debt like corporate loans increasingly attractive to a wide swath of investors. But for now, there isn’t too much yield on offer: The yield to maturity of the S&P/LSTA Leveraged Loan Index this year has dipped from about 4.7% to under 4.4%, touching its lowest level since April 2004, according to S&P Global Market Intelligence’s LCD. The index’s spread versus the Libor benchmark also is near its lowest level since mid-2019. Dividend yields via business-development company lenders also are falling. Meanwhile, yields on U.S. Treasurys have gone from around 0.9% to over 1.6%.

Volta Finance Limited (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.

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