CLOs gain amid surge in yields

CLOs generated positive total returns across the capital stack in September, the sixth straight month of positive returns, with returns primarily driven by positive carry. The technical backdrop remained supportive as the strong levels of new issuance and a return of refinance and reset transactions. US Treasury rates traded sharply higher during the month with 5- and 10-year Treasury rates increasing 35 basis points (bps) and 46 bps, respectively.

The move higher in longer-term Treasury yields extended into the third month, bringing the cumulative increase to 100 bps for both the 10- and 30-year US Treasuries relative to recent mid-July lows, with 10-year US Treasuries ending the month at the highest level since 2007. The move was less pronounced on the front-end of the yield curve with rates increasing 40 bps during this period for the 2-year yield.

Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.

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