700 billion of refis in corporate America coming in 2019.
Per recent Barron’s article (1/12/19), should bring significant downgrades in corporate credit.
We believe downgrades roll down: i.e. BBB to BB+, BB+ to BB, etc.
We believe we retrace the trump trade in 2019.
We are looking for CLO/Floating Rate spreads to hit 2016 levels:
- AAA: L + 150bps
- AA: L + 250bps
- A: L + 400bps