BB CLO Market Update June 2023 - ZAIS Insights

By Denise Crowley, Head of Structured Investments.
ZAIS Group — 3 minute read

BB CLO tranches are trading at higher yields of 12-18% due to wider spreads and market conditions. Caution is advised on tranches trading towards the higher end of the range. Potential market volatility is driven by economic indicators, inflation, liquidity concerns, and yield curve inversion. However, there are reasons for optimism.

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Diverging household health

By Bernhard Eschweiler, PhD 02.2023 — 3 minute read

• Financial health of lower-income households likely to deteriorate...
• ...spelling risks for sub-prime consumer loans and mortgages
• We see continued opportunities in careful credit selection

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It's Not Over Yet

By Bernhard Eschweiler, PhD 12.2022 — 2 minute read

• Fed tightening expected to slow soon and then pause in early 2023
• …but adverse economic impact to be felt for some time longer
• Tail credits remain vulnerable yet opportunities have emerged, as well

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The Big Housing Correction

By Bernhard Eschweiler, PhD 09.2022 — 2 minute read

• The plunge in home sales is caused by much deteriorated affordability
• …and not, in our view, a sign of a bursting housing bubble
• The main risk for housing would be a deep and protracted recession
• The surge in house prices is likely to force more households to rent

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Corporates under pressure

By Bernhard Eschweiler, PhD 06.2022 — 2 minute read

• Corporate leverage is elevated
• …creating risks given rising margin and interest rate pressures
• Leveraged loans in trade-off between duration and credit risks
• CLOs offer fundamental value amid rising leveraged loan default risk

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Households less vulnerable to recession risk than businesses

By Bernhard Eschweiler, PhD 05.2022 — 2 minute read

• Recession is unlikely in 2022 but risk is rising in 2023…
• …as monetary and operating conditions tighten
• Household and business credit fundamentals to diverge…
• …making credit selection key

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Corporate Bond and CLO Spreads to Diverge

By Bernhard Eschweiler, PhD 02.2022 — 2 minute read

• Fed tightening is expected to …
• ... widen corporate bond spreads …
• … and tighten CLO spreads
• Main risk is financial and economic instability

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Stubbornly Low Treasury Yields

By Bernhard Eschweiler, PhD 02.2022 — 2 minute read

• Treasury yields are low given imminent Fed tightening
• We expect Treasury yields to rise but probably not out of the low range

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Carbon Neutral for the Second Year

By Dan Curry, President and Chief ESG Integration Officer 01.2022
— 1 minute read

ZAIS is a signatory to the United Nations-Supported Principles for Responsible Investment and supports the companion Sustainable Development Goals.  As in 2019, ZAIS used a third-party vendor software to calculate the carbon footprint of our operation. ZAIS continues to purchase carbon offsets via Carbonfund.org. Our colleagues have picked two projects to help fund this year.

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