Clopremium
  • Home
  • No Login Needed: Enhancing transparency in the CLO market
  • Freemium: Complimentary Access for Investors
  • Basic Premium (Subscription Required)
  • US Module
  • EU Module
Clopremium
Wednesday, July 2, 2025
  • Blog
  • Contact
  • About
  • Why CLO Research Group
  • Log In
  • Membership Account
Clopremium
Clopremium
  • Home
  • No Login Needed: Enhancing transparency in the CLO market
  • Freemium: Complimentary Access for Investors
  • Basic Premium (Subscription Required)
  • US Module
  • EU Module
Clopremium > Blog > No Login Needed: Enhancing transparency in the CLO market > CLO Market Musings: US CLO BB Tranche Yield
No Login Needed: Enhancing transparency in the CLO market

CLO Market Musings: US CLO BB Tranche Yield

July 25, 2023
posted on Jul. 25, 2023 at 7:00 amSeptember 29, 2023

With the current attractive yield offered by new issue US CLO BB tranches, it comes as no surprise that this risk-return profile is generating significant interest. The table below illustrates the projected annual yield of a recently priced US BSL CLO BB tranche.

 Year 1Year 2Year 3Year 4Year 5
Yield (%)14.3%12.7%12.0%11.8%11.8%
Source: Intex, CLO Research

Upon redemption, a CLO BB tranche will pay par principal value. However, it is worth noting that CLOs rarely mature on their designated maturity dates. Conversely, the equity tranche typically yields a much lower final equity NAV compared to par. Nevertheless, it is worth mentioning that most of the redeemed CLO equity deals issued in 2020 saw a solid final equity NAV with above-par value – though those trades were primarily driven by principals rather than long-term regular arbitrage trades. As for the outstanding 2020 vintage deals, many of them had undergone resets, effectively transforming them into regular arbitrage deals.

Considering a 20CPR (Constant Prepayment Rate) and an asset reinvestment assumption of a 72-month bullet maturity, the recently priced BB tranche could potentially yield close to 13.0% to maturity. Consequently, equity investors certainly want a much higher projected IRR target. Could this be the main reason for the so-called lack of arbitrage opportunities?

Related articles:

US CLO New Issue Arb Trend

Assessing the Performance of Equity Tranches in Reset EU CLO Deals

Assessing the Performance of Equity Tranches in Reset US CLO Deals

Disclaimers

The information, research, data, research-related opinions, observations, and estimates contained in this document have been compiled or arrived at by CLO Research Group, based upon sources believed to be reliable and accurate, and in good faith, but in each case without further investigation. None of CLO Research Group or its service providers; authorised personnel, or their directors make any expressed or implied presentation or warranty, nor do any of such persons accept any responsibility or liability as to the accuracy, timeliness, completeness, or correctness of such sources and the information, research, data, research related opinions, observations and estimates contained in this document. All information, research, data, research-related opinions, observations, and estimates in this document are in draft form as of the date of this document and remain subject to change and amendment without notice. Neither CLO Research Group nor any of their third-party providers shall be subject to any damages or liability for any errors, omissions, incompleteness, or incorrectness of this document. A reference to a particular investment or security, a credit rating or any observation concerning an investment or security provided in the services is not a recommendation to buy, sell or hold such investment or security or make any other investment decisions and does not address the suitability of any investment or security. This article is not and should not be construed as an offer, or a solicitation of an offer, to buy or sell securities and shall not be relied upon as a promise or representation regarding the historical or current position or performance of any of the deals or issues mentioned in it.

Tags:BB-rated Tranche
CLO ResearchJuly 25, 2023
previous article

A Comparative Study: Alpha Performance Trends of US CLO Managers with Varied WAS Approaches

next article

EU CLO MVOC and EQ NAV Across All Tranches and Vintages

Leave a reply

You Might Also Like

No Login Needed: Enhancing transparency in the CLO market

Top 15 Largest Global CLO Managers by AUM Revealed

CLO ResearchMay 28, 2025
No Login Needed: Enhancing transparency in the CLO market

Top 30 Largest US CLO Managers by Assets Under Management Revealed (Updated)

CLO ResearchMay 27, 2025
No Login Needed: Enhancing transparency in the CLO market

League Table: EU CLO Manager Assets under Management (as of 31 March 2025)

CLO ResearchMay 23, 2025
No Login Needed: Enhancing transparency in the CLO market

What is MVOC and Why It Matters in CLO Markets

CLO ResearchMay 23, 2025

Recommended For You

No Login Needed: Enhancing transparency in the CLO market

Neuberger Berman CLO 59 Sets New Benchmark Amid Tightening BB Spreads?

CLO ResearchDecember 18, 2024

CLO Market Musings: New Issue BB Pricing

CLO ResearchJanuary 24, 2024

CLO Market Musings: Buying Discounted CLO Mezzanine Tranches

CLO ResearchSeptember 7, 2023

Search

Tag Cloud

AAA AAA-rated Tranche Alpha Trend Annual Distributions Arbitrage Arb Returns Assets below 60 price bucket Assets below 70 price bucket Assets below 80 price bucket BB-rated Tranche Blackstone BWIC Colour CLO AUM CLO Equity IRR CLO Equity NAV CSAM Cumulative Equity Distributions Elmwood EU CLO Equity IRR Generate Goldentree Incentive Fees Industry Exposure KKR Management Fees Maturity Wall Monthly wrap Musings MVOC MV Return Alpha NIM Oak Hill OC Ratios Par Build Performance Attribution Post-RI Prepayment Prepayment Primary Pricing rankings Reinvestment Period Reset WACC WAP WARF WAS

CLO Research Group Limited

85 Great Portland street, London W1W 7LT
Registered in England and Wales, #11919309
VAT: 323 5268 16

  • Term of use
  • Acceptable Use Policy
  • User Agreement and Privacy Policy
  • Cookie Policy