The structured credit and collateralized loan obligation (CLO) marketplace entered the new year on the heels of record-setting issuance in 2024. Despite general economic and political uncertainty at the start of the year, ample dry powder continued to flow into the asset class, causing broadly syndicated loan (BSL) and middle market (MM) CLO AAA spreads to tighten to multiyear lows of around 115 basis points (bps) and 144 bps over the Secured Overnight Financing Rate (SOFR), respectively, in February, with additional spread compression across the remainder of the capital structure. Total U.S. CLO volume for Q1 reached approximately $45 billion as of the end of March, trailing the year-ago tally by just $3 billion. The European CLO market had its strongest Q1 ever, suggesting another record year for global issuance was in the making.
The evolving tariff policies have introduced a high degree of uncertainty into markets, including for CLOs and other types of structured credit products.…