A lot of people are worried about collateralized loan obligations (CLOs). These are the levered buyers that have fuelled extraordinary growth in sub-investment grade lending to $1.4 trillion worldwide, while at the same time facilitating the evaporation of loan covenants and the extension of cheap debt to highly risky credits.
Ask any market participant where they think that the next crisis is coming from and their answer will almost always be corporate credit. “We have been watching the market very closely and have seen degradation in investment grade.
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