June 2022

CLO Monthly Monitor

Concerns in May surrounding the ability of corporate profits and consumers to withstand high inflation, rates and tighter policy continue to weighed on valuations.

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CLO tranches had negative total returns in May. CLO returns were-1.01% (AAA), -2.53% (AA), -3.41% (A), -4.40% (BBB), -6.53% (BB), and -5.17% (B). Concerns surrounding the ability of corporate profits and consumers to with stand high inflation, rates and tighter policy continue to weighed on valuations. The recent widening spreads, along with a steep forward rate curve, have resulted in CLO debt yields that are attractive relative to both their historical averages and to corporate bonds. In particular, high yield rated CLOs (BB-B rated) are yielding 12% versus their historical average which is close to 9%.