The Credit Edge by Bloomberg Intelligence PGIM Lauds ‘Bulletproof’ CLOs as Credit Risks Rise
Jun 12, 2025
Greg Peters, co-chief investment officer at PGIM Fixed Income, shares insights on the resilience of collateralized loan obligations (CLOs) in the face of rising credit risks. He classifies CLOs as 'bulletproof,' emphasizing their security during economic downturns. Discussion includes strategies for leveraging liability management and the challenges posed by growing default risks in the consumer and hospitality sectors. Peters highlights the importance of a long-term investment focus while navigating the complexities of current credit markets.
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Credit Spreads Are Too Tight
- Credit spreads are currently too tight given the above-average risk environment.
- Investors should button down risk profiles and favor roll and carry rather than extending maturity or lowering credit quality.
Tax Reform Increases Deficit Worries
- Tax reform will lead to larger deficits, not deficit reduction.
- Bond markets are increasingly worried about fiscal costs and paybacks forthcoming from the tax bill.
Fiscal Stimulus Averts Recession
- Fiscal stimulus may help avert recession despite higher rates.
- However, rising borrowing costs steepen the curve and pressure capital structures.