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Bruised Bank Loans

The Bank Loan sector disappointed investors in August 2011 in what was a mixed bag for bond performance overall. August witnessed the greatest performance disparity between Treasuries and more economically sensitive bond sectors, such as corporate bonds, since the fall of 2008. Such disparities are rare, but occur during periods of extreme safe-haven buying where investors favor Treasuries above all else. Bank Loans underperformed high-yield bonds in August despite the fact that bank loans are shorter-term in nature and senior to high-yield bond obligations in a company's debt hierarchy. Several factors compounded Bank Loan weakness in what was a difficult August for corporate bonds overall.

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