CLO Issuance Slumps Despite Favorable Market Conditions
Event summary
- CLO issuance declined to 98 deals totaling $40.1 billion in February 2026, down from 124 deals totaling $52.5 billion in the same period in 2025.
- Credit yields are near recent lows, with five-year Treasury yields at approximately 357 basis points and ICE US High Yield spreads at 298 basis points.
- Egan-Jones rated 1,673 CLO transactions as of February 2026, with senior tranche subordination averaging 37.1 percent and mezzanine tranche subordination at 14.7 percent.
- The MP CLO VIII portfolio contained $346.2 million in collateral, with 5.4 percent of assets rated CCC+ or lower by other agencies.
The big picture
The decline in CLO issuance despite favorable credit market conditions suggests underlying caution among issuers. Egan-Jones' more conservative rating approach highlights a divergence in credit quality assessments within the industry. The stability of credit yields and modest improvement in credit quality metrics indicate a nuanced market environment where structural features and portfolio characteristics play a critical role in investor decisions.
What we're watching
- Issuance Trends
- How the pace of CLO issuance will respond to recent market conditions and whether it can recover to previous peaks.
- Credit Quality
- Whether Egan-Jones' more positive view of CLO credit quality will be sustained or if other agencies will converge.
- Structural Features
- The impact of average subordination levels and coupon rates on the attractiveness of senior and mezzanine tranches.
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