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January has been a very quiet month for the European CLO market, with spreads tightening but still relatively wide. While we know there are around 30 different CLO warehouses open – some of which are for deals that couldn’t be priced in December and were postponed – the pipeline is struggling to materialise. So far only CSAM has managed to price a new deal, and in the process showed how difficult it has become to make the arbitrage to work for equity investors (see our recent blog CLO Arbitrage Worst Since 2013).

In our latest video blog, TwentyFour CEO and portfolio manager Mark Holman discusses why markets have recovered so strongly from a difficult start to the year, and whether the rally has more room to run.

The fourth quarter of 2018 is starting to look like a distant dream for the US high yield market. In the first three weeks of this year the US HY Index (B1-rated) has produced a year-to-date total return of 3.98%, while the equivalent CCC-rated index has delivered a YTD return of 5.63%.

After a long weekend, US investors came back to a busy primary market. Despite the weaker tone, investment banks announced a handful of new deals, all of which were heavily oversubscribed and from a healthy variety of issuers.

CLO investors like to talk a lot about arbitrage, or rather the lack of it. Arbitrage is what is left of the monthly interest on the leverage loans in the CLO pool once the liabilities have been paid, and it is the main reason why a growing number of investors have been buying CLO equity in the last 18 months.

In our latest video we hear from Partner and Portfolio Manager Ben Hayward as looks back on the performance of the ABS strategies in 2018 and looks ahead to the coming year.