Morgan Stanley finds sharp drop in US CLOs failing tests

In its latest CDO market update report, Morgan Stanley calculates that the number of US CLOs failing senior overcollateralisation tests has fallen from 45 last month to 37 this month, as the performance of US deals continues to improve. However, the number of European deals failing their senior test has increased from 13 to 19 in the same period.

The number of junior OC tests being breached paints a similar picture of US improvement and European deterioration. The number of European deals breaching at least one par value test increased by 21 last month, while for US deals the number fell from 272 to 253.