This caused year U. Treasury bond yields to rise above 4. The VIX, an index that measures expected market volatility, reached its highest level since summer. In Europe, Moody's downgraded France's credit rating to Aa3 due to political instability and President Macron's struggles to form a stable government. Similarly, German Chancellor Olaf Scholz lost a confidence vote, which could lead to early elections in High Yield bond indices in Europe and the U.
The primary CLO markets remained active, but some transactions were delayed until the new year in anticipation of improved market conditions and potentially tighter markets.
In terms of performance, CLO markets have outperformed broader credit markets this year. For comparison, U. Regarding , major credit rating agencies expect loan default rates to decrease, with US defaults estimated to stay around 1.
Thus, we have a constructive outlook for the beginning of regarding loans. Nonetheless, we do expect further loan spread compression coming which should show into the level of CLO Equity distributions through requiring an active refinancing and reset strategy for existing CLO. Over the last 6 month period, the cashflow generation was stable at c. In terms of portfolio activity, it was actually a rather busy month with notably the redemption in full of a US BB-rated position as well as profit taking on high cash price BB-rated and single-B rated Euro CLO tranches.
Proceeds were used to fund our warehouse commitments as well as purchasing a significant stake in a European CLO Equity tranche from the new issue market. The fund being c. Consequently, such investments are valued using the most recently available NAV for each fund or quoted price for such subordinated notes.
