Retail loan investors return as rate rises near

Retail investors are returning to bank loan mutual funds following seven straight months of outflows, with the Federal Reserve more clearly signaling an interest rate hike and higher secondary loan market prices starting to attract momentum buyers, investors and strategists said. Fed Chair Janet Yellen's congressional testimony this week increased confidence that the central bank will raise interest rates this year for the first time since 2006, although Yellen refused to be pigeon-holed on precise timing. Floating rate loans provide a natural hedge against rising interest rates. Retail accounts poured $81 billion into bank loan funds for 95 straight weeks until April 2014, Lipper data shows, before global economic concerns and crashing oil prices held U.S. interest rates low for longer than most economists anticipated.

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