As anticipated, weakness in the loan market results in a broad-based widening of discount margins across the CLO capital structure, with lower mezzanine tranches exhibiting the highest spread sensitivity — reflecting their structurally leveraged exposure to underlying credit risk. By contrast, senior tranches (AAA/AA) typically display a beta of less than 1.0 to loan market movements, indicating more muted spread volatility in response to changes in collateral spreads.
Tags:Beta