After the market implosion in March 2020, the cost of credit briefly spiked across the financial universe as a reflection of the increased risk facing debt holders. However, aggressive Fed policy in the form of multi-trillion dollar bond purchases pressured yields lower and helped restore a sense of confidence.
However, as sentiment recovered, so did the demand for interest income. The market for collateralized loan obligations (CLOs) then drastically inflated due to the comparatively higher returns they offered in a prevailing market of low – and sometimes negative – returns in comparatively safer, more traditional corners of the market. Fast forward 17 months and monthly CLO sales reached a 10-year high at approximately $18.6 billionin August 2021.
