Secondary volume rises; CLOs improve across capital stack, except B-rated tranches

By Cristal Cody

Tupelo, Miss., June 1 – CLO spreads are continuing to mostly improve in the secondary market, sources reported on Monday.

High-grade CBO/CDO/CLO paper climbed to a 95.30 average on Friday from 94.60 on Thursday, according to Trace data.

Average prices for non-high-grade paper rose to 76.30 from 73.30 on Thursday.

The week ended with $879.97 million of high-grade CBO/CDO/CLO issues and $161.48 million of non-investment-grade paper traded on Friday.

Secondary market volume was up from the $793.05 million in high-grade CBO/CDO/CLO paper and $136.49 million of lower-rated securities that traded on Thursday.

BWIC volume totaled $810 million over the past week, according to a BofA Securities, Inc. research note released Monday.

“Spreads tightened across the capital stack with the exception of CLO Bs,” BofA analysts said.

CLO AAA-A spreads tightened by 5 basis points to 25 bps, while CLO BBB-BBs tightened by 25 bps 50 bps “as there was healthy fast and real money demand across the stack with investors deploying capital amid the macro rally,” according to the report.

“Notably, we continue to see longer duration bonds outperform as investors are optimistic about manager's abilities to trade their portfolios during this unprecedented time,” the analysts said.

CLO AAA spreads were quoted going out on Friday 5 bps tighter on the week at the Libor plus 175 bps area.

BB-rated spreads came in 50 bps on average to Libor plus 1,075 bps, while B tranches were flat at Libor plus 1,550 bps.

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