CLO Monthly Monitor

CLO tranches had positive total returns in May. JP Morgan estimated returns for May were 0.48% (AAA), 0.43% (AA), 0.66% (A), 0.65% (BBB), 0.04% (BB), and 1.44%(B). The CS Leveraged Loan Index returned -0.09% in May. Both loans and CLOs outperformed fixed-rate investment grade and high yield corporate bonds, driven by interest rates that steadily climbed higher throughout the month. Leveraged loan issuance was muted in May, as loan issuers have increasingly turned to bond-for-loan take-outs and private credit borrowing. With the private credit loan market expanding, so has the issuance of middle market CLOs, increasingly referred to as private credit CLOs. Private credit CLOs, which have historically ranged from 10-15% of total CLO issuance, have grown to 22% of issuance in 2023.