The US and European markets for collateralized loan obligation securities (CLOs) in 2025 carried the momentum of a robust 2024 through headwinds from tariff announcements and trade wars and two notorious private credit defaults that led to speculation about wider deterioration in the debt space.
Despite unease about the assets underlying CLOs, interest rate spreads continued to tighten throughout the year in both the underlying assets and CLO debt. Persistent headlines during the first quarter of 2026 focusing on withdrawal requests by investors in credit funds and the enforcement, in some instances, of gates to manage outflows has led to a pullback in the CLO market.
Although the regulatory burden was perceived to have eased in the United States during 2025, two pronouncements from EU regulators surprised and jolted the CLO market.
