Rising Loan Prices Undercut CLO Arbitrage: Structured Weekly

The gap between interest rates on leveraged loans and those on collateralized loan obligations has shrunk so much that issuers don’t see much upside in pricing new debt, resulting in reduced CLO sales in recent months and lower expectations for the remainder of the year.

Analysts at JPMorgan Chase & Co. recently revised their 2023 issuance forecast to $100 billion, down from a prior estimate of $115 to $125 billion. Barclays Plc strategists also recently lowered their forecast, to $105 billion altogether, down from their estimate of $117 billion in November.

Both banks cited challenging arbitrage — the difference in ...