zerohedge.com / by Tyler Durden on 02/29/2016 14:41
Supply all but vanished in the wake of the crisis but staged a comeback starting in 2012 and by 2014, issuance was running at a $125 billion per year clip. As we noted last week, that’s roughly the equivalent of how much auto loan-backed paper came to market last year.
The problem is that stress on US O&G occasioned by the Saudi’s quest to bankrupt America’s oil patch is contributing to what certainly looks like a HY meltdown and that, in turn, has very real consequences for CLO collateral pools. In fact, 1.4% of assets held by US CLOs have either been downgraded or placed on credit watch negative this year, according to S&P.
New issue spreads are rising, issuance is collapsing, and both S&P and Moody’s recently downgraded several CLO 2.0 tranches for the first time ever.
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