For participants in the syndicated loan market, Valentine's Day usually brings a flood of new deals.

Suffice it to say, this year some hearts were broken.

Not only are there only a handful of deals in the market to be picked through, but also the transactions have come with smaller spreads-on average about 10% lower than in the fourth quarter. Likewise, prices in the secondary market have risen as pent-up demand begins to take hold.

The result: an eerily quiet loan market that some participants liken to an extended post-holiday slowdown.

"It's Feb. 16, but it seems like Jan. 16," said Scott Page, manager of two floating-rate funds for Eaton Vance Corp. in Boston. "There's been some lag in new issues, but they're promising us that deals are in the pipeline."

Like many fund managers, Mr. Page is suffering from the newfound popularity of the asset class. Investors have pumped nearly $2 billion into the Eaton Vance Classic Senior Floating Rate Fund and Eaton Vance Prime Rate Fund in the last year. The assets of those funds now total more than $6 billion.

"It does create pressure," Mr. Page said of the inflows, "but we would rather let cash build than buy loans not appropriately priced.

"We are more than happy to turn deals down we don't like ... and we've closed the fund before when we've had too much cash on hand. We have no problem doing it again."

He may have to, should the upward pricing trend continue.

The average spread above the London interbank offered rate for new BB- rated bank loans has fallen 9.7%, to Libor plus 242 basis points as of last Thursday.

That's from a high of Libor plus 268 in the fourth quarter, according to Portfolio Management Data.

Spreads for the same loans available to institutional investors were down 11% in the same period, to Libor plus 308 basis points from Libor plus 348.

"There hasn't been as much activity as people have expected," said Steven Miller, a principal at Portfolio Management Data LLC. "The dynamic is toward a decline in new-issue spreads. They've certainly tightened since December."

Mr. Miller said that the lack of new loans has exceeded even the most conservative of forecasts. Many in the industry thought the record pace of mergers and acquisitions would continue and that borrowers were holding back on taking new loans until market conditions were more favorable.

"Volume seems to be picking up, but it's not gangbusters," he said. "And that's surprising."

In the secondary market, the comeback has been led by trading of a loan to Sprint Spectrum, originally a $1.75 billion credit facility with spreads at Libor plus 40 to 250 basis points. That loan had been bid at 95 on a par value of 100. Recent bids have been as high as 97.

"It's not quite near the frenzy levels we saw in June," said Kevin Meenan, head of loan trading at Societe Generale in New York, "but a lot of issues are trading near par, and it's the first time we've seen that in a while."

Though the returns offered by new and existing loans shrink, conditions in the market are far from the heady days of last summer-just before global turmoil crippled the U.S. debt market.

Analysts say that as an asset class, loans continue to remain the least volatile, even with the price swings of the last six months.

For instance, returns on secondary market loans measured by the Donaldson Lufkin & Jenrette Leveraged Loan Index increased 0.44% in January. Though the increase was off from November and December, the return was far better than the 0.4% and 0.71% decreases measured in September and October-and represented an advantage over high-yield bond markets, which were essentially closed.

"When you look at what happened to the loan market against the high- yield market-it doesn't compare," said Jonathan Blau, a DLJ analyst.

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