Commercial real estate collateralized loan obligations (CRE CLOs) do not "portend a year-end celebration," writes Morningstar DBRS. Anyone hoping for a lift at the end of the year will find the elevator heading down.

Results in Q3 may have provided a false hope. But the "modest spike in volume" could have been the results of several quarters of originations by issuers. In that case, the improvement was using up inventory, and the issuers will need time to pull together enough loans to provide the collateral for a bond transaction.

Total volume for 2023 "is likely to be less than $10.0 billion and well below the market consensus at the beginning of the year, which expected a strong pickup in H2 2023," the company wrote. "The pickup never materialized, the broader U.S. economy proved to be resilient, and for the time being, higher interest rates have not caused a material slowdown in economic activity. However, the commercial real estate sector has been less fortunate; the high interest rates have caused significant disruptions and a slowdown in property sales and new loan originations."