UBS’ Amir Vardi on Rate Cuts, CLO Outlook, and Market Volatility

·43 min·4 clips

UBS's Amir Vardi explains how Fed rate cuts and August volatility will reshape the $1 trillion CLO market.

Host Hugh Minch interviews Amir Vardi, Managing Director at UBS Asset Management, on the CLO market outlook. Vardi frames the discussion within the post-GFC rate cycle, noting the Fed's shift from zero rates to hikes and now expected cuts. He details how CLO investors benefited from rising rates, with AAA yields jumping from 1.5% to 6.5%, but face coupon erosion from impending cuts. Vardi analyzes the early August volatility, attributing it to a Japanese carry trade unwind and warning of more frequent liquidity crises. He expects CLO issuance to remain strong, potentially reaching record levels in 2024. On underlying assets, Vardi forecasts defaults in the 3-4% range, slower than anticipated due to ample corporate liquidity. He redefines liability management exercises as defaults, explaining how sponsors capture discounts and the importance of lender size in negotiations. The conversation shifts to private credit, with Vardi arguing its growth stems from investors paying for illiquidity to avoid mark-to-market volatility, not higher yields. He sees private credit and syndicated loans coexisting, with power shifting based on market conditions. Vardi concludes with a mixed macro outlook, citing conflicting data on rate cuts. The episode includes a weekly restructuring news segment covering the Robert Shaw plan confirmation, sanctions against former Judge David Jones, and updates on Magenta, 8th Avenue Food, and low-cost airlines. A preview of upcoming court hearings, like the Kroger-Albertsons merger challenge, closes the show.

As heard by us

A focused CLO discussion connecting rate cuts, Japanese demand, and loan-market stress to credit mechanics.

This PlayNext review frames the CLO discussion around market mechanics rather than headline volatility, giving rate cuts, yen carry trade unwinding, and competition from private credit a practical credit-market shape.

Read the full review in PlayNext →

Why you'd press play

You want to understand how a projected September rate cut could ripple through CLOs before the headlines settle.

Read the full recommendation in PlayNext →

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