JPMorgan and Citigroup Are Ramping Up Their Investment in CLOs

The biggest US banks are stepping back into the $1.3 trillion market for collateralized loan obligations after nearly two years of shying away from investing in the securities.

Citigroup Inc. has resumed buying CLOs, according to people with knowledge of the situation. JPMorgan Chase & Co. and Bank of America Corp. are also ramping up holdings of AAA rated tranches, the safest and largest slices of the structures that bundle leveraged loans into slices of varying risk and return, said the people, asking not to be named discussing private transactions.

An increase in deposits in recent months is prompting banks ...