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CLO Issuance Jumps as U.S. Managers Bet on Volcker Rule Verdict

Federal Reserve Chairman Janet Yellen said last week that clarification on how the Volcker Rule treats collateralized loan obligations would be coming “reasonably soon.” Managers of the funds that package junk-rated buyout loans aren’t waiting to find out.

The Volcker Rule prohibits banks from investing in a CLO if the fund owns bonds. After issuance fell to a 17-month low in January, firms including CIFC Corp. raised CLOs this month either by getting rid of the option to purchase bonds or preserving the right to do so, according to people with knowledge of the deals, who asked not to be identified because the terms are private.