Libor mismatch gives CLO managers new arbitrage concern

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By David Bell
16 Apr 2018

A recent spike in three month Libor has prompted US loan borrowers to switch to the cheaper one month Libor rate, causing a mismatch between CLO assets and liabilities that is putting a new strain on the arbitrage in the structures.

The basis between one and three month Libor is at 44bp, the widest it has been since 2009, according to JP Morgan analysts writing on Friday April 13. Last year the basis was only 15bp, but it has widened as a result of technical shifts in the money ...

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