The slowdown in deal formation marks a sharp retreat from the 127 deals recorded during the November 2024 peak. Egan-Jones analysts attribute this decline to compressed returns for CLO equity holders, who face thin supplies of broadly syndicated loans and diminished yield opportunities. Despite this cooling in activity, the underlying credit quality of existing vehicles remains robust. The ICE BofA US High Yield Index spread averaged 270 basis points in August, hovering near a three-year low and suggesting that corporate debt markets remain broadly accommodating.

Internal metrics from the 1,613 transactions rated by Egan-Jones corroborate this stability. The firm observed a slight improvement in the weighted average rating score alongside a stable or declining share of assets rated CCC+ or lower. By applying conservative default probability models updated on a monthly basis, Egan-Jones maintains a more optimistic outlook on credit quality than many of its industry peers. Ultimately, the current market data distinguishes between the mechanical challenges of assembling new debt structures and the actual health of outstanding collateral, which continues to show resilience.