BofA Picks AAA CLOs as Credit Backdrop Sours: Structured Weekly

Investors in collateralized loan obligations ought to stick to the top-rated slices of those bonds as they provide relatively attractive spreads and high yields in an increasingly uncertain environment, according to Bank of America Corp.

“With a deteriorating credit backdrop, increasing tail risks, and a resurgence in rates volatility, we think CLO triple-As offer a compelling investment opportunity,” strategists Pratik Gupta, Chris Flanagan, Victoria Xu, Akash Gupta and Andy Fan wrote in a note on Friday.

They cite the high quality, solid liquidity, scalability and floating-rate nature of the debt, or in other words, the lack ...