US CLO Market Sees Slowest Issuance Since 2023
The US CLO market faces clear challenges heading into H2 2026, with new issuance volume down more than 20% from last year's pace, marking the slowest since 2023. Tight loan spreads relative to CLO liabilities have squeezed equity and arbitrage conditions, while AI-driven disruption has increased risks in software holdings.
Key Numbers
According to a report from Pitchbook, the US CLO market is entering the second half of 2026 with significant headwinds. New issuance volume has fallen more than 20% compared to last year's pace, the slowest since 2023.
Details of the Decline
The primary reason is tight loan spreads relative to CLO liabilities, which have squeezed equity returns and limited arbitrage opportunities that typically support new issuance. This has kept many issuers who were active in 2025 on the sidelines this year.
Fewer Active Managers
Only 88 unique managers have priced deals at the midpoint of 2026, compared to 107 a year ago. This decline in active managers reflects the cautious sentiment prevailing in the market.
AI Disruption Impact
The report notes that AI-driven disruption has increased risks in software holdings, the largest asset class in the CLO market. This factor has added further pressure on the market.
What This Means for Investors
The slowdown in CLO issuance reflects an unfavorable macroeconomic environment and structural market pressures. Investors should monitor loan spread developments and the impact of AI on underlying asset quality.
Frequently Asked Questions
Found this useful? Share it