అప్పుడు CDO…ఇప్పుడు CLO…

[dasari4kntr]

U.K. Crisis Spills Into U.S. Junk Debt

Collateralized loan obligation prices have been hit hard by a slump in the British pound and the unwinding of U.K. pension investments

Weakness in the CLO market may also have a knock-on effect on leveraged buyouts, including the financing for Elon Musk’s planned purchase of Twitter.

Fallout from the crisis in U.K. financial markets has hit a faraway corner of Wall Street: the trillion-dollar market for collateralized loan obligations.

Once a niche product, CLOs are now widely held by investors around the world, including the British pensions, insurers and funds that got caught by the recent crash in U.K. currency and government-bond markets. Many of them sold CLO bonds to meet margin calls, sending prices of the securities tumbling well below their intrinsic value, analysts and fund managers said.

Some U.S. investment funds rushed to snap up the bonds at what they considered incredible bargains.

Once a niche product, CLOs are now widely held by investors around the world, including the British pensions, insurers and funds that got caught by the recent crash in U.K. currency and government-bond markets. Many of them sold CLO bonds to meet margin calls, sending prices of the securities tumbling well below their intrinsic value, analysts and fund managers said.

Some U.S. investment funds rushed to snap up the bonds at what they considered incredible bargains.

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“It was the heaviest selling pressure we’ve ever seen,” said Tom Majewski, managing partner at Eagle Point Credit Management, a Greenwich, Conn.-based investment firm specializing in CLOs. Eagle Point purchased about $80 million of CLO securities in the seven trading days ended Oct. 5, double the amount it would normally buy in a seven-day period, he said.

In recent weeks, trading of the CLO bonds most commonly held by pensions and insurers hit its highest level since March and April of 2020, according to analysis by The Wall Street Journal of trading data reported to a U.S. regulator. CLO prices stabilized last week after falling to their lowest level since mid-2020, but the selling continued unabated. Average daily trading in the first week of October was around $1 billion, twice the daily average over the past 12 months, according to analysis by the Journal. 

The surge of activity took place while global markets—with the exception of the U.K.—were far calmer than at the outbreak of the Covid-19 pandemic. The S&P 500 lost 7% in the past three weeks, compared with 16% in March 2020.

 

Rising turmoil in CLOs shows how fluctuations of normally placid interest ratesin developed economies are rattling financial markets in unexpected ways. Forced selling by U.K. investors has also hit corporate bonds, stocks, mortgage-backed securities and asset-backed securities, investors and analysts said.

CLOs are a sliver of assets held by U.K. pension funds that try to guard against changes in interest rates through so-called liability-driven investment strategies. Con Keating, head of research at Brighton Rock Group, said he estimated them to be a maximum of 5% of assets under management.

Pensions and others had invested £1.6 trillion ($1.8 trillion) in LDIs by 2021, data from trade group The Investment Association show. In the relatively small market for CLOs, sales a percentage of that size have the ability to shift prices, unlike in larger markets for government bonds and stocks.

Full article…

https://www.wsj.com/articles/u-k-crisis-spills-into-u-s-junk-debt-11665440122

 

[Picheshwar]

CLO ,CDO ante endhi?

[dasari4kntr]

4 minutes ago, Picheshwar said:

CLO ,CDO ante endhi?

Collateral debt obligation 

collateral loan obligation 

cdo లో ఎవడిదో mortgage ని ఇంకెవడో కొనుక్కుని  mortgage collect చేసుకుంటాడు

clo లో ఎవడిదో loan (mostly corporate loans) ని ఇంకెవడో కొనుక్కుని collect చేసుకుంటాడు

ఒకప్పుడు అప్పు ఇచ్చేవాడు…అప్పు తీసుకునేవాడు అని రెండు categories మాత్రమే వుండేవి…ఇప్పడంటే మనకి computer technology బాగా పెరిగింది కదా ఇలాంటి complex derivatives ని సృష్టించి …rich people కి బాగా దోబ్బెట్టొచ్చు…

 

 

[dasari4kntr]

19 minutes ago, Picheshwar said:

CLO ,CDO ante endhi?

CDO artham kaavalante …idi choodu…CLO more or less same..

 

[Picheshwar]

12 minutes ago, dasari4kntr said:

Collateral debt obligation 

collateral loan obligation 

cdo లో ఎవడిదో mortgage ని ఇంకెవడో కొనుక్కుని  mortgage collect చేసుకుంటాడు

clo లో ఎవడిదో loan (mostly corporate loans) ని ఇంకెవడో కొనుక్కుని collect చేసుకుంటాడు

ఒకప్పుడు అప్పు ఇచ్చేవాడు…అప్పు తీసుకునేవాడు అని రెండు categories మాత్రమే వుండేవి…ఇప్పడంటే మనకి computer technology బాగా పెరిగింది కదా ఇలాంటి complex derivatives ని సృష్టించి …rich people కి బాగా దోబ్బెట్టొచ్చు…

 

 

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