Sales of new collateralised loan obligations are taking off in Europe for the first time since the financial crisis. These packages of high-yield debt were a major culprit behind the last credit bubble. But this time round, lower leverage has made CLOs safer. They even have a useful role to play in refinancing.
What’s a bond investor to do when safe government yields range from negligible up to low? For now, the solution appears to be buying corporate debt. That means being exposed to a slowing economy, and could end badly if central banks withdraw their largesse. But the good times probably won’t end soon.