"The structured credit market in Q1 2025 represents the sweet spot between risk and reward. We're seeing the most compelling opportunities in middle-market CLOs and specialty finance ABS, where spreads remain attractive relative to fundamentals."
The structured credit market has shown remarkable resilience in the first quarter of 2025, presenting unique opportunities for institutional investors. After the volatility of previous years, we're observing a stabilization in spreads coupled with innovative structures that offer attractive risk-adjusted returns. This report analyzes key trends and identifies the most promising sectors within structured credit for the remainder of 2025.
Our research indicates three primary drivers of the current market dynamics: the continued evolution of regulatory frameworks, technological advancements in credit analysis, and shifting investor appetite for yield in a moderate growth environment. These factors have created a favorable landscape for structured credit products, particularly in the $1.2 trillion collateralized loan obligation (CLO) market and emerging asset-backed securities (ABS) sectors.
"The structured credit market in Q1 2025 represents the sweet spot between risk and reward. We're seeing the most compelling opportunities in middle-market CLOs and specialty finance ABS, where spreads remain attractive relative to fundamentals."
Sarah Chen Head of Credit Research
New-issue CLO spreads tightened by 15-25 bps during Q1, with AAA tranches now pricing at SOFR + 165-175. The middle market continues to offer the most value.
Non-traditional ABS sectors including solar loans, PACE financing, and small business whole loans are seeing record issuance with strong investor demand.
Banks are increasingly using structured solutions to manage risk, creating opportunities for investors to access high-quality credit pools.
The U.S. market remains the most active, accounting for 68% of global issuance, but we're seeing particularly interesting developments in:
While the outlook remains positive, investors should be mindful of:
Our team of 12 analysts brings together decades of experience in structured credit markets across North America, Europe and Asia. This report represents our consensus view based on proprietary data analysis and market intelligence.
