Blog Post
Spread tightening and record warehouse activity point to strong CLO market recovery
CLO investors are shaking off the software selloff and geopolitical concerns, and the outlook is improving.
Analysts have cut issuance expectations versus 2025, but volume remains healthy and spreads across the CLO stack are tightening. How issuers navigate the volatility will determine summer issuance.
New CLO formation is rebounding from a volatility-induced slowdown triggered by the escalation in the Middle East and the AI disruption to the software sector. Global year-to-date volume reached $70 billion at the end of last week. During the lull, CLO managers refinanced and reset older vehicles, pricing $7 billion of refis and $7.6 billion of resets between March 30 and April 17.
The average spread on newly priced U.S. BSL triple-As sits around 126 bps, with European spreads grinding inside 130 bps. The pipeline points tighter from here: U.S. triple-A guidance is moving into the low 120s, and Europe is likely to settle in the 126-127 bps range over the coming weeks. Healthy issuance is building in both markets, according to the Octus CLO Pipeline Pulse.
Octus has identified 165 open warehouse vehicles in the U.S. and 131 in Europe — figures that have climbed to record levels as managers prepare to deploy capital.
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