Jun
11

CLOs That Volcker Rule Deems Bad for U.S. Banks Are Slumping

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A dramatic last-minute slump is occurring in a corner of the market for collateralized loan obligations ahead of a deadline for U.S. banks to get rid of some of their holdings.

Yield premiums on top-rated slices of certain types of CLOs — which bundle junk-rated corporate debt into new securities with varying risks — are widening “significantly,” according to a report from Deutsche Bank AG. The reason is U.S. banks no longer will be able to hold these particular CLOs under provisions of the so-called Volcker Rule that take effect on July 21.

“Market participants seem to have realized that July follows June and that the deadline for positions not in place in December 2013 is upon banks,” Deutsche Bank analyst Bjarni Torfason wrote Wednesday…

CLOs That Volcker Rule Deems Bad for U.S. Banks Are Slumping

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