Illustration: Sam Hadley
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What came first, the leveraged loan chicken or the CLO egg?
Seven rate hikes by the Federal Reserve since December 2015 have prompted a wholesale shift of the sub-investment grade credit market from fixed-rate bonds to floating-rate loans, largely because issuers are safe in the knowledge that there is a seemingly insatiable investor base of collateralized loan obligations (CLOs) desperate to buy.
Around $274 billion of leveraged loans were issued in the US in the first half of 2018, and the market is forecasting a record $150 billion of CLO issuance to mop them up.
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