Market updates and sector developments

KopenTech has launched a multifactor measure designed to enhance the monitoring of secondary CLO market conditions. Called the K-Indicator, the tool combines five key factors: the did-not-trade (DNT) rate; colour rate; same-day BWIC rate; triple-A average traded price level; and triple-A average price talk deviation from colour (PTDC). Derived from analysing CLO BWIC volumes and granular CUSIP-level pricing data, these factors are standardised and combined to provide a weekly market stress indicator, offering a single measure that summarises market conditions.

The DNT rate measures market demand by comparing traded securities against those tagged as did-not-trade: a rise in DNT percentage typically signals increased market stress. The colour rate indicates market transparency, determined by comparing trades with and without provided price information. Reluctance to post prices during stress periods can lead to lower trading levels.

The same day BWIC rate reflects market stability: same day BWICs, which are often linked to forced selling, limit bidders’ analysis time. The triple-A average traded price level serves as a proxy for market strength: trading below par in the secondary market can indicate a cash-raising trend among market participants.

Finally, the triple-A average PTDC measures market liquidity: a larger difference between price talk and colour suggests heightened market stress and rapid market movement.

The K-Indicator employs a dynamic scale, categorising values into ‘poor’, ‘fair’, ‘good’ and ‘excellent’, based on their relation to the previous 20 weeks.

In other news…

Homogeneity rules amended
Delegated Regulation (EU) 2024/584 has been published in the Official Journal of the EU, amending Delegated Regulation (EU) 2019/1851 on the homogeneity of exposures underlying STS securitisations. The new delegated regulation includes two new features: it allows for the harmonised inclusion of the rules applicable to STS synthetic securitisations; and extends the rules relating to the category of loans to individuals to loans to companies, whose conditions for assessing credit risk are based on the same approach as those applicable to individuals  These provisions enter into force on 6 March, securitisations issued and notified before that date will continue to be able to use the STS label.

Angel Oak converts two funds to ETF
Angel Oak Capital Advisors, a structured credit focused investment manager, has converted two of its mutual funds to ETFs, it announced on February 20.

The Angel Oak Mortgage-Backed Securities ETF is an actively managed pure play resi mortgage fund and it is joined on Angel Oak's fledgling ETF platform by the Angel Oak High Yield Opportunities ETF, which tracks high yield corporate bonds and securitised credit assets. The ETF platform was unveiled in November 2022, and now comprises four funds with about US$350m in AUM.

Corinne Smith, Simon Boughey