CLO Secondary Market Trends: February 2021 Edition

BWIC Volumes

February BWIC volumes dropped slightly to $3.3 Bn vs $4.0 Bn in January However $2.8 Bn traded demonstrating continued demand for the asset class.

TRACE Volumes

The first two months of 2021 saw increased CLO trading volumes with a total of approximately $13 Bn traded, $5.5 Bn of which were high yield bonds.

Dealer inventory

Dealers reduced balance sheets in December selling $300 MM of inventory, this trend continued in January with dealers selling over $674 MM, $600 MM of which was AMR-related. During February, another $630 MM was sold from dealer inventory to clients, reflecting strong demand from clients. 

BWICs as a % TRACE

Over the last five years, BWICs have accounted for roughly 1/3 of the TRACE reported volume, however we saw a notable decline in both IG and HY volumes from 52% of TRACE volume to 35% and from 29% to 18%, respectfully.

BWIC volumes by rating

February volumes were lower than average for across the capital stack except for A-rated and equity tranches. AAA volumes were $1.1 Bn versus the $1.8 Bn monthly average. There were two days with over $1 Bn in volumes: February 3rd and February 23rd. Average trade sizes were also slightly lower in AAA, BB and equity while slightly higher trade sizes for AA, A and BBB.

Trade of the month

In February we saw a $50 MM slice of Cerberus 2018 change hands and average AAA trade size was $5.4 MM.

DNT Rates remain low

We look to DNT% as a proxy for demand. DNT rates were low across all rated debt reflecting strong investor demand across the capital stack, including single-digit DNT rates for AAA, AA and A rated securities.

Prices increase across the stack

Color is a proxy for actual traded price. From January to February, we saw average prices increase with the exception of BB bonds. Both single A and BBB had strong performance with a price increase of over  half a point.

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