Poh-Heng Tan from CLO Research provides insights on EU CLO triple-A trading colour which despite the relatively small notionals involved, provide valuable insights into current secondary triple-A pricing

Shorter-dated CLO bonds changed hands in the 130–140bps discount margin (DM) range last week, with PRVD 4X AR covering at 129DM and names like BRGPT 2X A and AQUE 2020-5X AR trading closer to 140DM.

Longer-dated bonds were observed in the 140–150DM range—for example, ACLO 13A A1 at a 141DM cover, and FICLO 2023-1X AR at 150DM.

Source: SCI, Intex, CLO Research

Several triple-A bonds either traded or received bids at relatively wide levels. BNPAM saw a notably wider cover DM due to underperformance, while BECLO 3X AR, OCPE 2024-9A A, and INVSC bonds were likely influenced by factors such as liquidity—and, in the case of INVSC 9X AR, performance considerations as well.

Specifically, the market does not appear to differentiate between managers with varying post-reinvestment period prepayment tendencies, which may present opportunities for more discerning investors. Some managers consistently run post-RP prepayment speeds well below the modelled 20 CPR.

Last but not least, ACLO 13A A1 was priced in the primary market at par on 30 January 2025, at a discount margin of 122bps. Since then, the bond has widened by 19bps—still relatively muted compared to the underlying loan market, which has moved by approximately 38bps.