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New loans index gives support to CLOs

Revisions to a special index made up of derivatives instruments based on European leveraged loans is expected to kick-start the nascent market for synthetic collateralised loan obligations, which could be the first part of the structured credit markets to show signs of recovery, according to traders.

Synthetic CLOs are portfolios of loan credit default swaps, which are bets on the probability of companies defaulting on bank loans that financed leveraged buyouts.

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