Monitor: US BSL CLO New Issue Arb Trend Since 2017
As of July 19, 2024, the latest arbitrage metric was recorded at 223 bps, a visible improvement thanks to the recent tightening of CLO liabilities without the corresponding asset spread compression.
As of July 19, 2024, the latest arbitrage metric was recorded at 223 bps, a visible improvement thanks to the recent tightening of CLO liabilities without the corresponding asset spread compression.
As of 19 July 2024, the latest arb metric was recorded at 249 bps, significantly higher than the median value of 219 bps for 2023. More recently, the upward trajectory of the arbitrage trend has continued, thanks to tighter liability prints without corresponding asset spread tightening.
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...
EU CLOs: Quarterly Average Discounted Spread-to-Maturity Less Weighted Average DM in Graph The graph above shows the EU CLO arb picture over...
