Skip to content
Subscriber Only

Goldman Expects Moderate to Low Risks on Leveraged Loans, CLOs

  • Low chance of recession, strong earnings fundamentals to help
  • Banks hold relatively little of riskier junior CLO tranches
Video player cover image
Why Leveraged Loans Look 'Scary' After Outflows

Wall Street may be looking to the credit markets for signs of deterioration, but it might not be worth hitting the panic button just yet.

Risks to financial stability from leveraged-loan and collateralized-loan-obligations markets pose just a moderate risk to financial stability, and the default risk on CLO AAA tranches is likely to stay relatively low, according to Goldman Sachs Group Inc. The risk of runs on the short-term liabilities of banks driven by losses on leveraged loans or CLOs is also small.