CLO Spreads Are Expected to Stay Wide, Challenging Profits

Spreads on AAA CLO tranches are at their widest since early August after a rush of supply in a year when issuance is on pace to match last year’s record.

The widening spreads come at the same time as margins on the underlying leveraged loans have been falling over the last several years as many companies have been refinancing or repricing their loans. Margins on single-B rated institutional loans rose in September, but they are still below the average for July.