JPMorgan Adds to $14 Billion CLO Bet Amid Downgrades

When you've got the implicit backing of the Fed, why worry? Just buy!

JPMorgan Chase & Co. is adding to a $14 billion bet on collateralized loan obligations while other investors flee the market amid plummeting prices.

Within the past month, the largest U.S. bank by assets bought about $1.1 billion of the AAA rated portions of the securities for about 80 cents on the dollar, according to a person familiar with the transactions who declined to be identified because the trades were private. The bonds are typically backed by speculative-grade loans used to finance leveraged buyouts.

JPMorgan, based in New York, is buying even as the worst economy since World War II forces Chicago-based newspaper owner Tribune Co. and other companies to default. Standard & Poor’s said this month that lower-rated portions of scores of CLOs may face downgrades due to the “rapid deterioration in the credit quality” of the corporate loans.