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Analysis CLOs
Tariffs kill off year long CLO boom
by Shant Fabricatorian
The global impact on CLOs of President Trump’s tariffs was plain as volatility increased and spreads blew out. But managers helped keep US issuance steady with print-and-sprint deals
April saw a tidal shift in sentiment in the global CLO market, after US President Donald Trump announced stiffer-than-expected tariffs on trading partners. Uncertainty became the byword among market participants as policy changes came with little warning.
Market participants had already begun to brace for negative economic impact from raised tariffs and the attempts of Elon Musk and DOGE to reduce government spending. Spreads had been slowly climbing from historical lows reached in the early months of 2025.
Triple A spreads YTD 2025 (bps)*
Source: Creditflux data. * Triple A spread are bps over reference rate — SOFR (US BSL/MM) or Euribor (Euro ) All data is new issuance
Then, in both the US and Europe, spreads on CLO liabilities flared wider following ‘Liberation Day’ (see chart above) as volatility whipped financial markets around the globe and investors demanded richer payment for taking risk. Even the safest triple A spreads went from the low 120s in the US in March to more than 130bps over SOFR, and from the mid-120s to 140bps over Euribor in Europe.
Mezz tranches, which are more sensitive to near-term market upheaval and negative economic outlook, widened significantly. Triple B spreads found a benchmark in the low-to-mid 300s, compared to the mid-200s they were pricing at in February.
40.9
bn
$
Total value of the 86 US BSL CLOs priced in the past 12 months
In particular, the advent of CLO ETFs, which have grown to USD 20bn, had a major impact on liability prices in the US. The biggest such fund, Janus Henderson’s JAAA CLO ETF, saw over USD 1bn of outflows across the course of three trading days. It was the market’s first test of CLO ETFs and how their existence has changed market dynamics.
On the issuance front, volatility had a dramatically different impact across the US and European markets. The impact on the US turned out to be much more muted than anticipated. European issuance, on the other hand, effectively ceased throughout the majority of April, hit by the double whammy of uncertainty over tariffs plus the impact of risk retention changes from market regulators.
Global CLO issuance in past 12 months ($bn)
Global CLO pricings in past 12 months
Source: Creditflux data
US BSL issuance holds up
According to Creditflux data, April saw a total of 22 new US BSL CLOs price, valued at USD 10.37bn. These figures are comparable to the figures for March, and only around 13% below the average monthly new US BSL issuance over the past 12 months — itself a boom period for CLO issuance.
The numbers were helped along by a handful of successful print-and-sprints — deals done with no warehouses or with lightly-ramped ones to take advantage of beaten-down leveraged loan prices during market dislocations. Elmwood priced one such deal via SMBC Nikko, the first new issue for the new leadership team led by Christine Ferris, Anusha Joly and Mussie Tizazu (who came across from JPMorgan). AGL, Blackstone and BlackRock also successfully pulled off pricings in the brief window where such deals were possible, market sources said.
Mid-market issuance also continued throughout April, albeit at a slightly reduced pace compared to March. The total number of new deals dropped from six in March to four in April, representing a reduction in total new issuance value of around 23%. Overall, combining both new BSL and mid-market issuance, April’s level of USD 12.27bn saw the US CLO market finish virtually in line with its total from March of USD 12.49bn.
In both months the totals were spread across 26 deals.
European issuance nosedives
In Europe, the market seized up for almost four weeks. After Trinitas priced a new issue on 4 April, primary market activity ceased until HPS and Pemberton led the way with new prints at the end of the month.
HPS and Pemberton’s transactions priced their triple A paper at Euribor plus 140bps, around 15bps wide of the market level just before the hiatus. The pause in dealmaking resulted in the level of new European issues in April dropping 60% below its average monthly level for the past 12 months.
Repricings of European deals also largely ceased last month, with only Sculptor managing to price a short-dated reset the day after the new tariff regime was announced.
19.1
bn
€
Total value of the 41 European CLOs priced in the past 12 months
However, Europe was impacted by the revised guidance on risk retention from the European Supervisory Authorities. Market sources who spoke to Creditflux differed on the degree to which this had slowed issuance, but agreed that its short-term effect, particularly on smaller managers, was significant. Sources believe the guidance continues to have a chilling effect on issuance.
