Skip to content
Subscriber Only

CLOs, Leveraged Loans Will Miss Most of New Fed Plan Bounty

  • TALF only expanded to include AAA bonds of new CLO deals
  • Limits buying to CLOs holding newly issued leveraged loans
Washington As White House Wants To Send Individual $1,000 Stimulus Checks Now
Photographer: Andrew Harrer/Bloomberg
Updated on

There’s a huge catch to the Federal Reserve’s purchasing program that has been widened to include collateralized loan obligations: The central bank will only buy AAA bonds of CLOs that hold newly-originated leveraged loans.

The expanded Term Asset-Backed Securities Loan Facility (TALF) announced by the Fed Thursday was welcomed by the $690 billion CLO market with Wells Fargo analysts led by Dave Preston hailing it an “early Easter present.” Yet there’s already skepticism, including from Preston, about how quickly it can help kick-start the new issue machine that has sputtered amid volatility caused by the coronavirus with only a couple of deals surfacing in the past few weeks.