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CLOs Will See Better Rates and Performance in 2025

Moody’s expects even speculative-grade defaults to decline in the U.S. and Europe.

By Erik Sherman | November 26, 2024 at 05:31 AM

Things are looking up for collateralized loan obligations, or CLOs. A new Moody’s report on the 2025 outlook for CLOs says they’re braced for boosted performance and better chances at refinancing.

According to the report, conditions in the form of collateral defaults are improving in CLO markets due to continued growth and declining interest rates. Speculative-grade defaults are expected to decline over 2025, reaching 2.6% in the U.S. and 2.7% in Europe by next October. That would be a drop from the respective October 2024 rates of 5.6% and 3.3%.

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