CLOs

As the third quarter of 2024 comes to a close, TwentyFour Asset Management's Aza Teeuwen reflects on what this has meant for the Asset-Backed Securities (ABS) team. Not only were volumes across European ABS elevated throughout July and August, we also saw €34 billion in primary issuance – a significant increase from previous years.

The start of the school year ordinarily also marks the end of summer for the primary bond markets as issuance restarts, though this year feels rather different.

Headlines have painted a nervous picture of the health of consumers across Europe. Simultaneously, rating agencies have upgraded their outlook on the same consumer assets to neutral. The short story is that, although there has been a mild weakening in performance metrics, the consumer has held up well and is ahead of our base case expectations in almost all areas.

A consumer loan ABS issued last week by Consors Finanz, a fully-owned subsidiary of BNP Personal Finance, highlights the remarkable appetite investors are currently showing for mezzanine ABS bonds.

Having been the best performing asset class across fixed income in 2023, collateralised loan obligations (CLOs) have spent the first half of this year on similar form with record levels of issuance meeting equally strong demand from a broadening range of investors.

The European asset-backed securities (ABS) market saw a record issuance last week with €5bn of primary issuance.

Following an incredible 2023, collateralised loan obligation (CLO) investors are again having a great year with the asset class outperforming the more traditional asset classes.

After delivering a stunning 2023, collateralised loan obligations (CLOs) were once again one of the top performers in Q1. That leaves us with the question, where do we go from here?

Recently, our credit experts delved into the performance of the high-yield market, revealing how the maturity wall does not seem to be a significant challenge for most companies.

Last week Aza Teeuwen and our ABS team visited the Global ABS conference in Barcelona. One key discussion point in CLOs was around the lack of leveraged loan supply and the resultant sharp slowdown in the primary market

European Asset Backed Securities has been one of the few asset classes that has showed positive performance this year, Aza Teeuwen answers the million dollar question, how do you position for this?

As we approach the end of the economic cycle, tighter documentation is becoming increasingly important in providing downside protection against credit and extension risk of CLOs, says Pauline Quirin.