CLO Secondary Market Trends: March 2021 Edition
BWIC Volumes
Posted BWIC volumes during March rose over $1 Bn relative to February, while traded BWICs increased $500 mm, with $3.3 Bn traded. The proximity of posted and traded BWIC volumes points to continued demand for the asset class.
TRACE* Volumes
The first quarter of 2021 saw an increase in CLO bond trading volumes to a total of $13 Bn; $8.9 Bn were IG rated securities. There were two days in March with over $1 Bn trading: March 4th and March 24th. The March 24th volume was largely due to the AMR auction of Crescent’s Atlas CLO VIII.
*TRACE reports all CLO trades involving FINRA members.
BWICs as % of TRACE
March saw consistent figures with 31% of IG-rated tranches executed via BWICs, a slight uptick from trailing 12-month average. Whereas mezzanine and equity dropped to 13%.
Dealers Inventory
2021 started with substantial client purchases from dealers. This momentum continued with $151 mm sold to clients in March.
BWIC Volumes By Rating
During March, AAA tranche trading volumes were $1.45 Bn compared to the trailing 12-month average of $1.91 Bn. Equity volumes were just over $70 mm traded compared to $190 mm posted.
DNT Rates
All IG-rated tranches had DNT rates lower than average, with AAAs only having a 3% DNT rate, pointing to strong demand. High yield and equity tranches, on the other hand, saw higher than average DNT rates, including 53% of B securities. Higher DNT rates for the lower mezz work consistent with the observed spread widening.
Prices** Across the Stack
March saw a modest price drop across the stack; BBB bonds were the largest movers.
**Prices are based on trades that provided color and are likely to underestimate actual traded levels
KopenTech BWIC
KopenTech is launching Dealer Inventory, a new online tool where investors can view current inventory across a number of secondary trading desks. The feature will allow subscribers to view dealer inventory for sale and to filter available bonds by rating and other parameters. Further development includes the ability to engage and bid with dealers online.
