KBRA Releases Research ? Structured Credit: Under the SOFR Cushion

BY Business Wire | ECONOMIC | 01/19/22 02:30 PM EST

NEW YORK--(BUSINESS WIRE)-- KBRA releases a brief slide presentation summarizing our recent conversations with market participants regarding the transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Finance Rate (SOFR).

In speaking with several collateral managers and arranging banks, KBRA has observed several themes emerge as these participants think about new and outstanding collateralized loan obligations (CLO) and other structured credit transactions in 2022. Key discussion points highlighted in the slide presentation include portfolio transitions, benchmark replacement events, basis risk, credit spread adjustments, and loan floors.

Click here to view the slide presentation.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA?s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Source: KBRA

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.