Pricing levels in the European CLO secondary market have softened this month.

“CLOs have come off quite a bit with triple-As and double-Bs the most notable movers in secondary,” says one trader. “Unusually, it’s been driven by stock market moves rather than anything in the high yield market – high yield levels are little changed, but CLOs have moved wider in sympathy with share prices.”

Nevertheless, the market has been busy, the trader reports. “Dealers were quite long in inventory so over the past three weeks we’ve seen a steady supply of BWICs as they adjust holdings to quarter-end requirements. That supply has been focused around triple-As as they have the lowest price moves and the drop in BWIC activity today tells me those requirements have now been met.”

Double-Bs have been the next most active sector over the month and have seen significant price moves – bonds that were around 250DM to first call are now at 350-400. The trader adds: “Elsewhere in the stack there have also been moves wider, but the picture is less clear – for example, there aren’t a lot of offers circulating on double- and single-As so we’re relying on primary to gauge movements there.”

As noted above, there are currently no European CLO BWICs on today’s schedule.