After an extremely slow start to the year, issuance of U.S. collateralized loan obligations is picking up speed.

As of Feb. 27, 2014, U.S. CLO issuance for the year totaled $10.0 billion, according to research published today by Wells Fargo. While that is still well below the $15.9 billion issued in the first two months of 2013, February 2014’s volume of $7.5 billion is more than double January’s and higher than February 2013’s volume of $6.8 billion.

“The uncertainty surrounding the Volcker Rule and CLOs is still having an effect; however, it appears some investors may be finding more comfort with the various provisions in CLO 3.0 deals that allow new issue CLOs to be Volcker-compliant,” the report stated.

In addition, CLOs still offer a healthy spread pickup to other triple-A rated investments.

CLO offerings in the market this past week included the a $450 million deal from Credit Suisse Asset Management dubbed, Madison Park Funding XIII; the $492 million Regatta III Funding from Napier Park and the $521 million Mountain Hawk III CLO from Western Asset Management, according to rating agency presale reports.

In addition, CLOs still offer a healthy spread pickup to other triple-A rated investments.

Wells Fargo said that demand for CLO notes in the secondary marekt is strong, especially considering the large increase in primary issuance month-over-month, which it said can occasionally lead to slower secondary volumes.

"Generally, spreads are slightly tighter in the secondary," the report stated. "This is in contrast to the primary market, where spreads are marginally softer (especially in mezzannine tranches), likely [due to] to the pickup in supply and a wider range of managers."


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