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CLO AAA spreads move past 2011 wides; high-grade CBO/CDO/CLO paper softens
By Cristal Cody
Tupelo, Miss., March 19 – High-grade securitized secondary market volume is thinning as paper softens.
CLO AAA spreads moved out nearly 80 basis points last week to the Libor plus 200 bps area and continued to widen this week.
“AAA spreads are now past the wides of 2011, and AA-A are now just wide of the levels of Q4 2011,” Wells Fargo Securities LLC analysts said in a report on Thursday.
CLO AAAs are now in the Libor plus 275 bps area, according to the report.
“Estimating spreads has become much more difficult as dispersion and tiering has increased significantly, and many tranches trade based on dollar price, not spread,” according to the report.
On Wednesday, $576.34 million of high-grade CBO/CDO/CLO securities were traded, down from $1.79 billion on Tuesday and $895.52 million on Monday, according to Trace data.
Also on Wednesday, $107.87 million of lower-rated CBO/CDO/CLO issues traded, up from $25.59 million on Tuesday but off Monday’s volume of $189.9 million.
The high-grade paper softened Wednesday to an average trading price of 89.20 from 92.30 in the previous session and to a 90.80 weighted average price from a 94.20 weighted average price on Tuesday.
Lower-rated CBO/CDO/CLO paper weakened to an average 68.2 price from 84 and to a 65.8 weighted average price from a 76.8 weighted average price on Tuesday.
In other market activity on Thursday, Triumph Capital Management, LLC closed on its previously reported $654.3 million Trinitas CLO XII Ltd./Trinitas CLO XII LLC offering.
The CLO had priced $416 million of class A floating-rate notes at Libor plus 131 bps.
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