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CLO 2020 supply pegged at $60 billion; high-grade CBO/CDO/CLO paper steady in secondary
By Cristal Cody
Tupelo, Miss., July 15 – CLO dollar-denominated deal volume is expected to reach nearly double the $35 billion of supply priced so far by the end of the year.
About $60 billion of gross CLO issuance is forecast, while leveraged loan issuance could reach $250 billion in 2020, according to a BofA Securities, Inc. securitized products update conference call on Wednesday.
Broadly syndicated CLO deal volume totaled $115 billion in 2019.
CLO spreads have retraced some of the wides seen in March and later following the pandemic closures.
AAAs are currently at a Libor plus 175 basis points average, in from the wides of 500 bps, according to Pratik Gupta, BofA Securities’ head of CLO and RMBS research.
BBB spreads have retraced 62% of their 2020 wides to the Libor plus 525 bps average.
“CLO structures remain resilient and they have come through the Covid cycle in an orderly manner,” Gupta said. “Spreads remain cheap versus corporates, and we think they should continue to benefit from the Fed’s participation in the IG and HY bond markets.”
Lower-rated paper gains
Looking at the secondary market, $544.34 million of high-grade CBO/CDO/CLO issues and $156.1 million of lower-rated issues were traded on Tuesday, Trace data shows.
High-grade CBO/CDO/CLO paper averaged 96.80 over the session, compared to lower-rated issues traded at an average of 80.70.
Secondary market volume was up from Monday’s total of $322.84 million of investment-grade issues and $70.7 million of lower-rated securities traded.
Prices were flat for investment-grade CBO/CDO/CLO issues, while lower-rated tranches improved from Monday’s average of 73.50.
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