Widening spreads and a steep forward curve in March strengthened the already attractive relative value of CLOs.
CLO tranches had mixed total returns in March. CLO returns were 0.00% (AAA), -0.18% (AA), -0.19% (A), -0.08% (BBB), 0.11% (BB), and 0.40% (B). Though, given the significant increase in Treasury yields in March, CLO returns outperformed those of U.S. Investment Grade and High Yield corporate credit. The recent widening spreads, along with a steep forward rate curve, have further strengthened the already attractive relative value of CLOs. The yield pickup relative to corporate bonds at each credit rating is substantial, without the addition of interest rate risk.