The three largest U.S. banks are preparing for a comeback in the market for collateralized debt obligations backed by high-yield, high-risk loans, two years after issuance tumbled when credit markets seized up.

JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. are approaching managers of leveraged loans to offer terms for new collateralized loan obligations following a record rally this year in the debt, according to people familiar with the discussions who declined to be identified because the talks are private. The highest-rated portions of CLOs have climbed to 89 cents on the dollar from a record low of 69 cents in April, according to Morgan Stanley data.

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