August 2022

CLO Monthly Monitor

CLO tranches had positive total returns in July. Despite modest spread tightening last month, we believe AAA-rated CLOs are still priced at very attractive levels and represent a buying opportunity today for ratings sensitive or more risk-averse investors.

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CLO tranches had positive total returns in July. JP Morgan CLOIE index return estimates were 0.57% (AAA), 0.29% (AA), 0.33% (A), 0.88% (BBB), 1.53% (BB), and 1.35% (B). CLO issuance remains strong, with $11.8bn issued in July, bringing cumulative issuance for 2022 to $80.8bn. Despite modest spread tightening last month, we believe AAA-rated CLOs are still priced at very attractive levels and represent a buying opportunity today for ratings sensitive or more risk averse investors. With AAA CLO spreads over 180bps equating to all in yields at 4.6%, this provides significant relative value as compared to similarly rated securities.