The recent decision by the European Central Bank (ECB) to deliver a 25 basis points cut on the three key interest rates has sparked various discussions. The ambiguity surrounding President Lagarde’s refusal to provide forward guidance on the ECB’s trajectory and the absence of a detailed plan for a gradual easing process have left many analysts puzzled. Lagarde noted that macroeconomic projections anticipate higher domestic core inflation, remaining above target for 2024 and 2025, before potentially returning to 2.0% in 2026. This duality in the ECB’s rhetoric is noteworthy, particularly since the current economic climate in Europe resembles the situation in March when the Government Council’s approach seemed, or was perceived to be, different despite similar inflation forecasts.
In the United States, a comparable duality emerged from the Federal Reserve, where a hawkish tone contrasted with the stronger-than-expected Consumer Price Index (CPI) data released on 12th June. The added layer of geopolitical uncertainty, especially with the heavy 2024 political election calendar, further contributes to the potential for increased market volatility.
Given these developments, it is timely to revisit some key points regarding Collateralised Loan Obligations (CLOs), which have garnered significant attention in recent years due to their superior returns and robust fundamentals.
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.
