CLO Returns Drop Below Zero, New Deals Dry Up as Buyers Rattled
- Spreads widen out in secondary trading across capital stack
- New issuance slows amid volatility, leveraged loan worries
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Spreads on collateralized loan obligations trading in the secondary market gapped out this week and new issues slowed to a crawl as coronavirus jitters rattled a market known for being less susceptible to macro shocks than other corners of the credit landscape.
CLO secondary spreads widened by 15 to 25 basis points this week in AAA to AA tranches, and as much as 50 to 75 basis points in single-A to BB tranches, according to Citigroup Inc. That’s pushed the average year-to-date total return of all CLO tranches excluding AAAs into negative territory, said Maggie Wang, an analyst at the New York-based bank.