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CLOs Are Finally Taking a Beating Like Rest of Credit Market

  • Spreads widen more than high-grade for first time this year
  • Weakness seen in riskier leveraged loans creeps into market
The $23 Trillion Argument Against Dismantling U.S Earnings Rules

Photographer: John Taggart/Blomberg

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The once-red hot market for corporate loans bundled into securities is starting to cool as investors ponder whether the Federal Reserve may rein in rate increases to counter signs of slowing economic growth.

Collateralized loan obligation spreads in the secondary market have widened over the London interbank offered rate more than investment-grade corporate bonds for the first time this year. It’s a sign the weakness seen across credit markets for months, especially in the leveraged loans that make up CLOs, has finally caught up to the asset class.