#United States #New York #Egan-Jones Ratings #Credit Quality #CLO Market

Egan-Jones Releases March 2026 CLO Market Summary

Egan-Jones Ratings Company has recently published its summary report for March 2026, providing valuable insights into the trends and conditions of the collateralized loan obligation (CLO) market. The analysis covers key metrics such as issuance trends, credit quality indicators, and various structural features that characterize the CLO landscape.

According to the report, despite generally favorable credit market conditions, CLO issuance has experienced a downturn. In February 2026, the market saw 98 CLO deals with a total issuance of $40.1 billion, a decrease from 124 deals amounting to $52.5 billion during the same timeframe in 2025. Although there has been a minor uptick in issuance in recent months, it still lags behind the peak observed in November 2024, which boasted 127 deals worth $54.6 billion.

The report further elaborates that credit yields are currently hovering around recent lows. Specifically, five-year Treasury yields are approximately 357 basis points, while the ICE US High Yield option-adjusted spread stands near 298 basis points, marking a significant drop from the April 2025 high of 461 basis points. This data reflects an environment where investors may need to reassess opportunities in the CLO sector.

In examining CLO credit quality, Egan-Jones noted a modest evolution. The Weighted Average Rating Scores (WARS) across the reviewed deals exhibited percentiles of 3621, 3711, and 3839 at the 25th, 50th, and 75th levels, respectively. Importantly, the proportion of CLO assets rated CCC+ or lower has been stable or even slightly declining, suggesting an improvement in the overall credit quality within the market.

Egan-Jones maintains a more optimistic perspective on CLO credit quality than many of its counterparts in the credit rating agency landscape. Unlike some peers, Egan-Jones bases its ratings primarily on projected losses and typically employs more conservative probabilities of default, highlighting their distinct analytical approach.

The report also dissects the structural attributes of CLO deals rated by the agency. As of February 2026, Egan-Jones had rated a total of 1,673 CLO transactions. The average subordination for senior tranches was around 37.1%, while mezzanine tranches averaged 14.7%. Furthermore, the average coupons were approximately 4.9% for senior tranches and 7.0% for mezzanine tranches, complemented by average spreads of 1.3% and 3.5% over three-month SOFR, respectively.

In a specific examination of a transaction, the MP CLO VIII portfolio was noted to comprise approximately $346.2 million in collateral, presenting a diversity score of 66 and a weighted average rating score of 3726.3. Around 5.4% of the portfolio’s assets were rated CCC+ or below by other agencies, reinforcing the need for investors to carefully review the underlying assets in their CLO investments.

Overall, the report serves as a crucial resource for institutional investors seeking comprehensive insights into issuance trends, portfolio characteristics, and evolving credit conditions within the CLO market. Egan-Jones continues to be a prominent name in credit ratings, having been founded in 1995 with an aim to provide accurate evaluations and proxy services to its clients.

About Egan-Jones Ratings

Founded as an NRSRO in 1995, Egan-Jones Ratings Company stands out for its commitment to offering timely and precise credit ratings as well as proxy services. Their rigorous methodologies provide investors with essential tools to navigate the complex landscape of credit markets.