U.K. Crisis Spills Into U.S. Junk Debt

Fallout from the crisis in U.K. financial markets has hit a faraway corner of Wall Street: the trillion-dollar market for collateralized loan obligations.

Once a niche product, CLOs are now widely held by investors around the world, including the British pensions, insurers and funds that got caught by the recent crash in U.K. currency and government-bond markets. Many of them sold CLO bonds to meet margin calls, sending prices of the securities tumbling well below their intrinsic value, analysts and fund managers said.

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