CLO Monthly Monitor
CLO performance was mixed in February, as carry drove positive total return, but spreads widened across most tranches in the capital stack.
CLO Monthly Monitor
CLO performance was mixed in February, as carry drove positive total return, but spreads widened across most tranches in the capital stack.
Contents
CLO tranches delivered positive total returns in February, with the JP Morgan CLOIE Index reporting returns of 0.29% (AAA), 0.34% (AA), 0.34% (A), 0.43% (BBB), and 0.88% (BB).
New CLO origination was $18.1 bn across 38 deals, broadly in line with the roughly $20 bn in average monthly activity during the fourth quarter though modestly off of the record-setting pace set in calendar year 2024.
AAA spread compression, a prevalent theme of 2024, continued in February with some shorter-dated deals pricing sub-100 bps. Many managers took advantage of this to reprice older deals off of call protection, deriving $37.5 bn in reset and refinance activity in February, in line with forecasts from Bank of America, which estimates $339 bn in BSL CLOs could refinance or reset this year.
Strong technical dynamics within the CLO asset class, characterized by limited net new issuance and steady performance from the underlying collateral pools, are expected to support prices remaining near or above par throughout the capital stack.
CLO tranches delivered positive total returns in February, with the JP Morgan CLOIE Index reporting returns of 0.29% (AAA), 0.34% (AA), 0.34% (A), 0.43% (BBB), and 0.88% (BB).
New CLO origination was $18.1 bn across 38 deals, broadly in line with the roughly $20 bn in average monthly activity during the fourth quarter though modestly off of the record-setting pace set in calendar year 2024.
AAA spread compression, a prevalent theme of 2024, continued in February with some shorter-dated deals pricing sub-100 bps. Many managers took advantage of this to reprice older deals off of call protection, deriving $37.5 bn in reset and refinance activity in February, in line with forecasts from Bank of America, which estimates $339 bn in BSL CLOs could refinance or reset this year.
Strong technical dynamics within the CLO asset class, characterized by limited net new issuance and steady performance from the underlying collateral pools, are expected to support prices remaining near or above par throughout the capital stack.