The sharp unwinding of risk observed in the US spilled over to European loans on Tuesday, triggering the largest single-day loss since April 11, 2025.
With renewed AI-disruption fears and tariff uncertainty dragging on already fragile investor sentiment, the weighted average bid price of the Morningstar European Leveraged Loan Index (ELLI) fell to 95.31 on Feb. 24, its lowest level since Oct. 30, 2023.
The moribund performance — captured by a 21 bps drop in loan prices from the prior day’s close — pushed Tuesday’s total return (including interest) to -0.20%, the largest single-day loss since April 11, 2025, which occurred amid a sell-off spurred by “Liberation Day” tariff measures.
Quantifying the move, the index in 2026 has already seen three trading sessions in which the average bid price in the ELLI has dropped 20 bps or more, compared to six such sessions in all of 2025 and just one in 2024.
In the year to date, European loans have returned negative 0.71%, the worst reading for the comparable period since 2022.
While price action has been less severe in Europe than in the US, exposure to the Software sector among credits in the ELLI is under scrutiny.
Recent analysis by LCD shows that while the European market is less exposed to the Software downturn than the US, elevated leverage and a looming 2028 maturity wall could spur significant downgrade pressure for borrowers going forward.
Featured image by Thana Prasongsin/Getty Images
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