Egan-Jones Analysis Finds CLO Issuance Subdued While Credit Quality Holds Steady

NEW YORK, Oct. 1, 2026 /PRNewswire/ -- Egan-Jones released a review of the collateralized loan obligation market examining why new issuance has slowed sharply while the credit quality of existing deals has held steady. The firm traces the slowdown to compressed returns for CLO equity investors rather than to deterioration in the loans these vehicles hold.

US CLO issuance fell to 98 deals totaling $40.5 billion in August, down from 124 deals and $53.5 billion in August 2025, a decline of 21% by count and 24% by volume. Both measures remain well below the November 2024 monthly peak of 127 deals and $54.6 billion.

Tight loan spreads and thin new supply of broadly syndicated loans have squeezed the returns available to CLO equity, the most junior claim in a CLO's capital structure. Broader credit conditions stayed accommodating over the same period. The ICE BofA US High Yield Index option-adjusted spread, a gauge of the extra yield investors demand to hold riskier corporate debt, averaged 270 basis points in August, close to its three-year low and far below the 461 basis points reached in April 2025.

Egan-Jones' own deal metrics point the same way. Across the 1,613 CLO transactions the firm rated as of August, the weighted average rating score declined slightly, a modest improvement because a lower score corresponds to lower estimated default risk. The share of assets rated CCC+ or lower held stable to slightly lower, and weighted average asset and tranche coupons both dipped.

Egan-Jones currently takes a more positive view of CLO credit quality than other rating agencies. The firm derives its ratings from estimated losses, applies default probabilities it describes as more conservative than industry standards, and updates its cash flow models and ratings monthly as trustee reports become available.

For investors, the review separates a slowdown in new deal formation from a weakening of the loans already outstanding. Egan-Jones reports thinner supply alongside collateral credit that has held, a combination that says more about the economics of assembling new transactions than about the condition of the deals already in the market.

About Egan-Jones Ratings
Egan-Jones, an NRSRO founded in 1995, offers timely and accurate credit ratings and proxy services.

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SOURCE Egan-Jones Ratings Co.