Modest improvements in the global economy and the broadening of collateral types for CLOs could usher in another record year for this market in 2020, says corporate trust expert Steve Hessler.
The Deutsche Bank Research team’s growth outlook forecasts a global bottoming out of business sentiment, which is likely to show modest improvements moving into 2020, with the risks of a near-term recession declining1. Additionally, interest rates are likely to remain where they are for at least the next 12 months.
In Federal Reserve Chairman Jerome Powell’s comments after the October Federal Open Market Committee meeting, lower rates would require a “material reassessment” of the economic outlook. Negotiations between China and the United States over trade disputes have evolved from a comprehensive agreement, to smaller phase one, phase two and phase three agreements. With the upcoming 2020 US Presidential election, pressure to reach an agreement may mount, resulting in a phase one agreement said the Deutsche Bank research note.
A potential increase in economic growth next year versus 2019, relatively benign liquidity markets and a possible trade deal, albeit slimmed down, between China and the United States elevate the prospect of a robust CLO market in 2020.