CLO primary action quiets; secondary spreads mixed; AAAs, AAs steady; BB tranches widen

By Cristal Cody

Tupelo, Miss., June 15 – CLO primary action remains light in June, while the refinancing space has been quiet since March, sources reported Monday.

More than $27 billion of dollar-denominated CLOs and over €7 billion of European CLOs have priced year to date.

Meanwhile, secondary spreads were mixed with AAAs flat at on the week at the Libor plus 160 basis points average, Wells Fargo Securities, LLC analysts said in a note on Monday.

“CLO spreads were essentially unchanged on the week, after spreads tightened through Wednesday and then moved softer in the back of the week, driven by the equity market selloff, combined with BWIC fatigue,” Wells Fargo Securities, LLC analysts said in a note on Monday.

The analysts tracked nearly 90 BWICs of over $1.8 billion last week.

CLO AAs also were unchanged, and A spreads were steady at a Libor plus 265 bps average.

“U.S. CLO single-A spreads have already tightened back through March levels, while AA spreads are roughly 40-50 bps wider than the levels of the end of February,” the analysts said.

While high-grade and high-yield spreads widened after the Federal Reserve’s “uber-dovish” message on Wednesday following the monetary policy meeting, most securitized products missed the “memo” and ended the week tighter, according to a BofA Securities, Inc. research note released on Monday.

However, CLO spreads were mixed.

“The macro sell off on Thursday caused spreads to leak wider across the capital stack after a week of tightening,” the analysts said.

CLO BB spreads widened 50 bps in tandem with the sell-off seen on Thursday, according to the note.

“Money managers were looking to monetize gains from the recent rally while others were looking to deploy fresh capital at wider levels,” the BofA analysts said.

BWIC volume was the heaviest over the past week since March 20, when $2 billion of volume was seen, the BofA analysts said.

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