Spreads on triple-A tranches of new CLOs are likely to tighten by 10 to 15 basis points by the end of the year, according to Wells Fargo.

That would bring these spreads down to the range of 135 to 140 basis points over Libor, not nearly as low as the year-end levels some participants were forecasting at the beginning of this year. In a weekly research report, analyst David Preston said that a full pipeline of new deals and other factors such as a thin investors base will combine to limit downward pressure on CLO spreads.

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