CLO Issuance Lags Despite Tight Credit Spreads
Event summary
- Egan-Jones reports CLO issuance rose to $43.2B in July from $41.8B in June, still below November 2024 peak of $54.6B.
- ICE BofA US High Yield spread hit annual low at 284bps (vs April 2025 high of 461bps).
- Weighted average rating score improved slightly; CCC+ assets stable to modestly lower.
- Senior tranche subordination averaged 35.5%, mezzanine at 13.5%.
- Egan-Jones' CLO ratings are non-NRSRO but more constructive than peers.
The big picture
The disconnect between accommodative financing conditions and subdued CLO supply suggests lingering credit quality concerns. Egan-Jones' non-NRSRO ratings add another layer of complexity to the market's risk assessment. With $43.2B in July issuance still well below 2024 peaks, the tension between favorable spreads and cautious origination will be key to watch.
What we're watching
- Credit Quality Perception
- How Egan-Jones' more positive view of CLO credit quality will influence market participation.
- Issuance Recovery Pace
- Whether the muted issuance reflects structural shifts or temporary caution.
- Spread Tightening Impact
- The pace at which tighter spreads could spur more aggressive CLO formation.