CLO Market Softens in Early 2026 Amid Credit Quality Concerns
Event summary
- CLO issuance fell to 67 deals totaling $27.6 billion in March 2026, down from 106 deals totaling $48.2 billion in March 2025.
- Credit yields have moved toward recent lows despite weaker issuance, suggesting market caution.
- Weighted average rating scores improved slightly, while CCC+ or lower rated CLO assets stabilized or slightly declined.
- Egan-Jones rated 1,670 CLO deals as of March 2026, with average senior tranche subordination at 36.1% and mezzanine at 13.4%.
- Average spreads over 3-month SOFR were 1.3% for senior tranches and 3.4% for mezzanine tranches.
The big picture
The CLO market continues to exhibit signs of caution in early 2026, with issuance volumes significantly lower than the previous year despite stable credit quality indicators. This tension between soft issuance and low credit spreads suggests a market balancing between risk aversion and yield-seeking behavior. Egan-Jones' analysis highlights the importance of monitoring credit quality trends, particularly in the context of broader market dynamics and regulatory environments.
What we're watching
- Market Sentiment
- How ongoing concerns regarding credit quality will affect CLO issuance volumes in the coming months.
- Credit Spreads
- Whether low credit spreads can be sustained amid weaker issuance and stable credit quality.
- Rating Agency Views
- The pace at which Egan-Jones' more positive view of CLO credit quality diverges from other rating agencies.
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