This is not usually considered an optimal solution.
We saw it in 2008 in venture capital where there would be a "topping off" round to set price before an IPO. we saw it last year in NFT's with the wash trading and the marking-the-close trades and we see it currently in Private Equity with daisy-chain purchases running "valuation" higher and higher.
In fact, it is such a tell on the market that it is probably worth figuring out how to bet against, at minimum, the CLO packagers (their revenue stream dries up) if not the whole ecosystem.
From Bloomberg via Yahoo Finance, December 5:
European banks are snapping up large pieces of their own collateralized loan obligations, keeping the market for CLOs afloat in the absence of the US and Japanese banks that traditionally make up the bulk of the buyer base.
French bank Societe Generale SA arranged its first CLOs since the Global Financial Crisis in November, and then following an example by Deutsche Bank AG earlier in the year, it also played a key role in getting the deals out the door by purchasing a chunk of the AAA -- or safest -- bonds. In doing so, these banks are hoping they can keep the wheels turning until more takers materialize.
Europe’s CLO markets screeched to a halt earlier this year after global sentiment soured in the wake of the US Federal Reserve’s first 75 basis point hike. Concerns about downgrades and defaults are growing as the loans that act as collateral for CLO bonds are issued by heavily indebted companies that are especially exposed to higher costs and interest-rate rises. There have been other shocks as well, such as the fire sale by UK pension funds during the recent gilt crisis.
Major global banks have historically been the biggest customers for CLOs, but the ones that put the deals together didn’t use to be significant investors in their own vehicles....
....MUCH MORE
Bear in mind that CLO's are not CDO's and wouldn't have the same systemic dynamics but there is an opportunity in here somewhere.
