RLPC-Europe's LevX index slips to new lows as equities slide

LONDON, Oct 27 (Reuters) - Europe's synthetic index of leveraged loans credit default swaps (CDS), the LevX, slipped to record lows in mid-morning trade on Monday as a sell-off in Asian and European equity markets revived fears of a recession.

The LevX Series 3 senior index of leveraged loan credit default swaps sank to around 78-80 in mid-morning trade, three traders said, down from an official close of 79.80-80.45 last Friday.

"There's been a big Asian equity sell-off so everybody is quite nervous, and the LevX is the easier way to hedge (for cash loans)," a LevX trader said.

Another loan trader also noted the emergence of a large $970 million Bids Wanted In Competition (BWIC) in the U.S. market, which was adding to the downward pressure.

On the cash front, average bids on Europe's top 40 leveraged loans closed at record lows of 67.36 percent of face value on Friday.

Barclays analysts believe loans will lose another 5-10 points before any recovery, and will become a 'buy' once they reach the low 60s on average.

"The LevX could underperform the Crossover during the sell-off, but post sell-off, LevX versus Crossover should be reconsidered," Barclays credit analysts Mahesh Bhimalingam and Eugene Regis said.

The iTraxx Crossover index ITEX05Y=GF, made up of 50 mostly 'junk'-rated credits, was at 912.5-916.5 in mid-morning trade, according to Markit data.

In a research note this morning, the analysts reiterated their underweight stance on high yield and leveraged loans.

"We expect leveraged finance to be further affected by a difficult economic environment leading to deteriorating fundamentals, while the basic capital markets infrastructure continues to be stretched," they wrote.

(Reporting by Zaida Espana; Editing by Jason Neely)