CLOs

We can debate whether the European Central Bank is behind the curve or not, but Christine Lagarde says rates will be in non-negative territory by September.

As inflation continues to outstay its welcome in the global economy, we have previously discussed the impact of rising input costs on corporates and how crucial pricing power can be in such a challenging environment.

As 2021 wore on we became increasingly concerned that the disconnect between asset prices, economic fundamentals and monetary policy was becoming more acute.

The first month of 2022 has passed, and it’s been quite a roller coaster for broader equity and credit markets, with volatility climbing to its highest level since January 2021.

If 2021 was a bad year for global bond returns, it follows there were few natural shelters to be found within fixed income from the brunt of inflation and rates-driven volatility; the Barclays Global Aggregate Index (a widely used broad measure of bond performance) returned -4.7% in USD terms, while European investment grade credit returned -1.1% despite credit spreads tightening over the course of the year.

The first two trading weeks of the year are coming to an end and unlike previous years they have been packed with activity.

Markets have clearly experienced some periods of volatility this year, and while European CLOs haven’t been immune to this, both fundamentals and prices have been remarkably stable.

With floating rate assets likely to be high on investors’ shopping lists for 2022, Doug Charleston looks at the floating rate options across fixed income and highlights the highest yielding opportunities.

What we are currently experiencing is a disconnect between monetary policy, the economy and the markets, a disconnect that in our view will struggle to survive much longer.

After a mixed start to Q4 for risk assets, Elena Rinaldi examines how European ABS and CLO assets have fared so far in Q4 and the factors currently affecting both markets.

Let’s not forget that the BoE dropped rates from 0.75% right down to 0.1% at the start of the COVID-19 pandemic back in March 2020, having only managed to put through two hikes in 2017 and 2018. It has changed course sharply before.

BWIC – or bids wanted in competition – lists, are a unique characteristic of the ABS and CLO markets, where they are widely used in secondary trading when investors are looking to sell bonds.