Summary
- While downgrades of loans to CCC could accelerate, we believe high-quality CLOs are well-positioned to absorb the additional CCC exposure.
- Regarding opportunities in CLO debt, while CLO BBs have outperformed high yield year-to-date on a total return basis, this has been driven by rate duration as opposed to credit-spread widening.
- Despite macro and loan downgrade concerns, we continue to be confident in the significant structural protection provided against credit losses in underlying loan portfolios.
For further details see:
Loan Downgrades Are Coming, But CLO BBs Remain Attractive