Triple A CLOs are the last thing banks will sell, says BofA Merrill

Increased funding pressure on European banks should not lead to these institutions selling triple A CLO holdings, according to Bank of America Merrill Lynch's CLO Weekly report published this week. It argues that, as a robust, stable and strongly performing asset, first pay CLOs will be at the very bottom of most banks' deleveraging lists. Banks are more likely to use these assets as collateral for secured funding, rather then sell them outright, it says. This means that supply of triple A CLOs in the secondary market is likely to remain constrained, something that has pushed upwards on prices for some time.