Egan-Jones’ October update described credit measures across its rated CLO deals as stable through September, against a backdrop of higher Treasury yields and wider high-yield spreads.
The agency put median exposure to assets rated CCC+ or lower at 6.1%. It described the share as little changed or modestly lower but did not identify the comparison period. Egan-Jones said its weighted average rating score improved over the past year. The score measures default risk in underlying loans, and the agency says lower scores indicate stronger credit. It reported rating 1,568 CLO deals as of September 2026.
The U.S. Treasury’s daily data show the five-year par yield rose from 4.49% on Aug. 31 to 5.09% on Sept. 30, an increase of 60 basis points. The ICE BofA U.S. High Yield Index option-adjusted spread widened from 2.60% on Aug. 28 to 3.12% on Sept. 30, according to the Federal Reserve Bank of St. Louis’ FRED database, which identifies ICE Data Indices as the source. On Sept. 16, the Federal Reserve raised its target range by 25 basis points, to 3.75%–4.00%.
Egan-Jones said higher rates can increase payments on floating-rate loans held by CLOs while adding to borrowers’ interest costs. The agency identified software loans as the weakest sector in the portfolios it tracks, citing concerns about disruption from artificial intelligence (AI). It has argued that AI assistants could make software companies’ interfaces less central, a concern discussed in earlier EconoTimes coverage of Egan-Jones’ software analysis. The agency also highlighted rising loss severity in distressed exchanges and other selective defaults.
CLOs pool leveraged corporate loans into securities with different repayment priorities, according to a filing with the U.S. Securities and Exchange Commission. Those layers, called tranches, have different positions in the repayment order and risk profiles. In a separate review of 20 deals, Egan-Jones said its assessments tended to view credit quality more positively than those of other rating agencies.
