Credit: Coronavirus fright hurt CLOs, loans and high yield
admin | March 6, 2020
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Risk-off sentiment due to coronavirus has widened CLO secondary spreads and slowed new issues, while it continues to cause large outflows from US loan and high yield funds. In the week ending on March 4, CLO ‘AAA’ to ‘AA’ secondary spreads widened 15 to 25 bp while ‘A’ to ‘BB’ spreads widened by as much as 50 to 75 bp. The year-to-date total return of all CLO tranches excluding ‘AAA’ has consequently entered the negative territory. Meanwhile, “multiple [CLO] deals have been postponed, delayed, or shelved due to market volatility and wider spreads” according to Bloomberg. In the same week ending on March 4, outflows from loan funds including ETFs totaled $1.47 billion, compared with $269 million in the week ending on February 26. Likewise, retail investors withdrew $5.1 billion from US high yield funds, the largest weekly redemption since February 2018 according to LCD. The Bloomberg and LCD articles are here and here and here (subscription required). Sources: Bloomberg, LCD, APS.
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