CLO Issuance Slows Amid Compressed Returns, Credit Quality Stable
Event summary
- US CLO issuance fell to 98 deals totaling $40.5 billion in August 2026, down 21% by count and 24% by volume from August 2025.
- Tight loan spreads and thin new supply of broadly syndicated loans have squeezed returns for CLO equity investors.
- Egan-Jones reports stable to slightly lower share of assets rated CCC+ or lower across 1,613 rated CLO transactions as of August 2026.
- ICE BofA US High Yield Index option-adjusted spread averaged 270 basis points in August 2026, near a three-year low.
- Egan-Jones updates its cash flow models and ratings monthly, applying more conservative default probabilities than industry standards.
The big picture
The slowdown in CLO issuance reflects economic challenges in assembling new deals rather than deterioration in existing collateral. Egan-Jones' analysis suggests a separation between new deal formation dynamics and the steady credit quality of outstanding CLOs. The firm's more positive view of CLO credit quality, based on conservative default probabilities and monthly updates, provides a counterpoint to broader market trends.
What we're watching
- Investor Returns
- How compressed returns for CLO equity investors will affect new deal formation.
- Credit Conditions
- Whether accommodative broader credit conditions will continue to support CLO market stability.
- Rating Methodology
- The pace at which Egan-Jones' more conservative rating approach diverges from other agencies.
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