As the market enters Q2, cautious optimism persists, though widening spreads could shape deal flow
The US CLO market entered 2026 with robust primary issuance and sustained momentum, but nascent signs of deceleration are emerging as credit fundamentals and macro headwinds introduce greater complexity, according to this month's market review from Maples Group.
Primary issuance volumes remained elevated at the start of the year, with approximately US$73bn in new pricing across more than 160 tranches in January and February. February saw a notable uptick in deal flow, underscoring persistent demand for leveraged loan exposure and a robust pipeline of new mandates.
However, the firm notes that overall issuance is lagging 2025’s pace, with early indications of market fatigue and a slowing primary calendar emerging in March.
“The US CLO market has demonstrated its continued resilience in the opening months of 2026, building on a record-setting 2025,” Maples Group says, while cautioning that “market volatility, global uncertainties and domestic concerns… have begun to emerge and have an impact on the progress of deals.”
One of the most pronounced shifts has been in refinancing and reset activity, which has contracted sharply year-on-year.
Maple attributes this roughly 45% decline to widening liability spreads, which have eroded arbitrage opportunities and dampened managers appetite for repricings.
The firm highlights shifting deal dynamics, including tighter liability structures, smaller notional deal sizes, and elongated syndication timelines. The rapid “print-and-sprint” executions prevalent at the end of 2025 have largely faded, replaced by more deliberate warehousing and ramp-up strategies.
Despite these headwinds, forward pipeline indicators remain constructive. Warehouse formation accelerated materially in early 2026, suggesting managers continue to assemble collateral and position for new issuance, albeit with a more risk-off bias.
Looking ahead, Maples Group struck a balanced tone on the outlook for 2026.
“It appears that the US CLO market enters the second quarter of 2026 in a position of cautious optimism,” the firm says, citing resilient structural protections and robust credit enhancement. However, it cautions that “widening liability spreads, increased concerns around deteriorating credit quality, and softer investor demand” could act as headwinds to performance.
Geopolitical tensions, inflationary pressures, and uncertainty around interest rates remain the key risks for the remainder of the year. Even so, floating-rate exposure, structural protections, and active management keep investor demand steady.
While gross issuance is projected to undershoot 2025’s record volume, the market’s structural resilience and active management suggest it remains well-positioned to navigate evolving credit and macro volatility.
The firm also predicts the European market is "well placed" to consolidate its strong 2025 performance this year. "Market participants should anticipate continued innovation in deal structures as the industry adapts to shifting commercial, economic and regulatory dynamics in 2026."
Finally, the firm expects investors to become more focuses on credit quality as the year goes on due to the lack of leveraged loans as collateral in unlikely to improve.