Every now and then stuff happens in leveraged lending that reassures us things we’ve learned about the market are actually true. Such was the case last Friday when a big bank credit trading desk noted unusual data on retail loan fund flows.

Weekly outflows of $3.5 billion had been reported. That would have been a record, far in excess of the $2.1 billion set seven years ago. Rather than dutifully passing this along, however, the analysts immediately expressed doubt. They cited contrary evidence – selling activity in the secondary market was quiescent, buyers were keeping up a steady beat, and institutional investors would have remarked about it.

“Perhaps it was caused by Martians,” one trader suggested. Nothing extraterrestrial, but sure enough, a correction was quickly issued – $151 million of in-flows. Order in the universe restored.”

We cite this as supporting evidence that loan supply and demand are inextricably linked. If $3.5 billion in demand had been removed from the broadly syndicated market in one week, a cascading series of events would have whipsawed prices and spreads. Nice to see a live demo that loan behavior is more science than science fiction.