By the Numbers

CLO Snapshot

| August 14, 2026

This material is a Marketing Communication and does not constitute Independent Investment Research.

Quality CLO managers extended their winning track record in July against the leveraged loan market index and speculative peers. And ‘AAA’ through ‘A’ CLO debt delivered solid returns with relatively low volatility. August already looks busy, with ‘BBB’ and ‘BB’ spreads tightening and projected equity yields rising.

The highlights from July:

  • RETURNS AND RV: ‘AAA’ through ‘A’ trade tight; ‘BBB’ and ‘BB’ trade wide
  • REFI AND CREDIT RISK: Refi risk remains high; credit improves
  • MANAGER PERFORMANCE: Quality managers beat the market by 9 bp
  • PRIMARY FLOWS: Refi/reset still dominates YTD2026 primary flow
  • LOAN MARKETS: Net loan supply falls in July; only $12B net YTD

RETURNS AND RV

CLO returns are similar across ratings in July

Note: Returns through 7/31/26.
Sources: Palmer Square, Bloomberg and Santander US Capital Markets.

Top-of-stack CLOs deliver relatively high returns per unit of risk over the past 12 months

Note: Returns from 7/31/25 through 7/31/26.
Sources: Palmer Square, Bloomberg and Santander US Capital Markets.

CLO discount margins widen in July: ‘AAA’ by 1 bp, ‘AA’ by 2 bp, ‘A’ by 1 bp, ‘BBB’ by 3 bp and ‘BB’ by 12 bp

Note: Spreads to SOFR through 7/31/26 for the average outstanding class. New-issue spreads may differ.
Sources: Palmer Square, Bloomberg and Santander US Capital Markets.

CLO ‘BBB’ and ‘BB’ end July wide to their 1-year median DM; only ‘BB’ remains wide over longer periods

Note: A percentile rank of 100 is widest, 50 is median and 0 is tightest. Data show average DM to SOFR for outstanding debt.
Sources: Palmer Square, Bloomberg and Santander US Capital Markets.

CLO ‘BBB’ and ‘BB’ also trade wide to their 1-year median spread to corporate debt; ‘BB’ remains wide over longer periods

Note: A percentile rank of 100 is widest, 50 is median and 0 is tightest. Data show average DM to SOFR for outstanding debt.
Sources: ICE BofA Corporate Indices and Santander US Capital Markets.

New BSL CLO spreads price in a tight band from ‘AAA’ through ‘A’

Note: Based on 19 deals. Monthly spread changes may reflect shifts in manager and deal structure mix.
Source: Santander US Capital Markets.

Secondary BSL spreads trade tight to primary from ‘AAA’ through ‘A’ and wide to primary for ‘BBB’ and ‘BB’

Note: NI DMs reflect markets throughout the month and may include deals priced weeks earlier; secondary DMs reflect month-end markets. The spreads are not directly comparable.
Source: Santander US Capital Markets.

New middle market CLO spreads trade in a wider band

Note: Based on two to five deals. Monthly spread changes may reflect shifts in manager and structure mix.
Sources: Palmer Square, Bloomberg and Santander US Capital Markets.

A narrow gap in spreads on new BSL and middle market CLOs

Note: Based on median BSL and middle market spreads.
Source: Santander US Capital Markets.

REFI AND CREDIT RISK

Of 524 CLOs within six months of first call, 74% have 0 bp or more of refi incentive at July’s median NI ‘AAA’ DM

Source: Santander US Capital Markets.

Credit: Junior OC cushions rise in recent months

Source: INTEX, Santander US Capital Markets.

Credit: Median loan spreads remain flat

Source: INTEX, Santander US Capital Markets.

Credit: WARFs continue to fall

Source: INTEX, Santander US Capital Markets.

Credit: Diversity scores rise

Source: INTEX, Santander US Capital Markets.

Loan weighted average lives lengthen slightly

Source: INTEX, Santander US Capital Markets.

MANAGER PERFORMANCE

Quality portfolios beat the Morningstar/LSTA loan index risk-adjusted return by 9 bp through July and speculative peers by 11 bp

Note: Performance covers the three monthly reporting dates before Jul 20, 2026, for managers tracked by Santander US Capital Markets with at least five deals issued since Jan 1, 2011. Attribution starts with the calculated total return of each CLO’s leveraged loan portfolio for the 3-month reporting period ending on the stated date. Reporting periods may vary among CLOs, including those managed on the same platform. Each period is matched with the same period in the Morningstar/LSTA Leveraged Loan Index. For deals with at least 18 months of performance history since pricing and no apparent cash-flow errors, the analysis calculates beta and multiplies it by the index return to estimate return from broad market performance. If beta cannot be calculated, the analysis uses the average beta of the manager’s deals, weighted by average principal balance. The difference between beta-attributed and actual performance is manager alpha.
Sources: INTEX, Markit and Santander US Capital Markets LLC.

Shenkman, Black Diamond, TCW, Crescent and Kennedy Lewis lead the Top 25 alpha producers for the three months through July

Note: See note for table above.
Source: INTEX, Santander US Capital Markets.

Find detailed CLO manager analysis at US Portfolio Strategy.

PRIMARY FLOWS

BSL refi/reset still dominates the YTD2026 primary market

Source: Bloomberg, Santander US Capital Markets

LOAN MARKETS

Gross leveraged loan issuance tops $65B in July

Source: PitchBook | LCD Leveraged Loan Data US, Santander US Capital Markets

Net leveraged loan supply falls $7B, or 0.45%, in July, leaving the YTD total at $12B

Source: PitchBook | LCD US Leveraged Loan Index Factsheet, Santander US Capital Markets

Rolling 90-day yields on new ‘BB’ and ‘B’ loans hold steady through July

Note: Data show rolling 90-day yields.
Sources: PitchBook | LCD and Santander US Capital Markets.

Special thanks to Sophia Cui for key data analysis.

Steven Abrahams
steven.abrahams@santander.us
1 (646) 776-7864

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