Investors requested bids on $6.2bn of US CLO tranches in September, the highest posted BWIC volume in 12 months, according to data from KopenTech.
With $2.7bn of traded BWICs, the execution volume fell slightly from August, but remained above the year average. And the increased liquidity suggest a robust CLO market, according to KopenTech.
More than $20bn of trades were reported to the US Financial Industry Regulation Authority (Finra), similar to August levels and the highest since April.
While primary issuance volumes fell from more than $11bn in August to $9.6bn in September, triple-A spreads for longer-dated broadly syndicated CLOs tightened into the range of 167bp-200bp.
“We see a steeper CLO AAA curve developing,” said Olga Chernova, chief investment officer at Sancus Capital Management. “This is a very healthy sign and good for the CLO formation.“
Junior tranches played a bigger role than before in secondary trading, following a price rally.
Prices rose to 12-month highs across debt tranches last month, but investors found the strongest gains towards the junior end of the capital structure. Average prices for double-B notes rose by 0.98 from 91.64 in August to 92.62 in September.
The average price for triple-As was 99.57, an increase of 0.22 from 99.35 in August. Traded BWICs for the most senior notes dropped to $970m, or 67% of their year-long average.
Traded volumes of double-B notes were double the 12-month average last month, taking up 22% of the capital stack.
“We saw $1bn posted and $600m traded on high yield BWICs in September, which is close to the five-year high,” said Chernova. “[It] seems like investors thought it was a good time to lock in gains."