In this edition of the Lakemore Insights – August 2021 report, we discuss the drivers of current CLO equity arbitrage conditions, which continued to improve on their already extremely attractive levels through August and resulted in the highest month for CLO new issuance by volume since last year. We offer an analysis of Q2 earnings season, which shows that US corporates’ EBITDA have not only recovered but improved upon their pre-pandemic levels. Meanwhile, we explain why the leveraged loan market continues to flourish, due to plentiful upgrades, ultra-low defaults and an active primary market. In our view, current market conditions are a strong tailwind for CLO equity, and we continue to anticipate that 2020-2022 vintages are likely to be among the strongest on record for the asset class.