The loan index’s moving 4-week average discounted spreads are used as a proxy for the US BSL CLO portfolios’ discounted spreads. Arbitrage refers to the index’s discounted spread net of the cost of funding, based on discount margins (of AAA–BB tranches of top-tier deals) rather than spreads. New issue upfront costs and management fees are not accounted for. The loan index used for this analysis is the Morningstar LSTA US B-BB Ratings Loan Index.
The loan index’s moving 4-week average discounted spreads are used as a proxy for the EU CLO portfolios’ discounted spreads....
Monitor: US BSL CLO New Issue Arb Trend The loan index's moving 4-week average discounted spreads are used as a...
The absence of CLO arbitrage has been garnering significant attention recently. This concept encompasses several facets, most notably the initial net interest margin of a CLO deal. However, in periods of loan market volatility, the importance of the initial net interest margin diminishes somewhat, as market participants redirect their focus towards the enticing potential rewards associated with the rise in equity NAV.
Graph: US and EU Arb Based on Discounted Loan Spreads and CLO DM Arb (US) is calculated by taking the...
US CLOs: Quarterly Average Discounted Loan Spread-to-Maturity Less Weighted Average DM in Graph The graph above shows the US CLO arb picture...
