The risk premium that investors demand for holding CLOs continues to decline as refinancing activity continues to dominate the new issuance, and the trend looks set to continue heading into the final two months of the year.

According to the Loan Syndications and Trading Association, yield spreads on the least risky notes issued by collateralized loan obligations, those rated triple-A, has narrowed to an average of 147 basis points, the lowest level of 2016 and in from 160 basis points in May.

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