European CLO Weekly: Caution with high fixed-rate bond buckets

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European CLO Weekly

Caution with high fixed-rate bond buckets

Market update: First PC CLO reset, softer CLO BBs

03 August 2026

On the CLO primary, 2 new issue deals, 4 resets, and 1 refi priced last week, including

the first European PC CLO reset. YTD gross new issuance exceeds €36bn whilst

reset/refi volume is inching towards €39bn already.

Structured Finance

Europe

CLO

On the secondary, CLO BWIC volume increased to below €270mn vs. less than €130mn

the week prior, with strong triple-A, double-B, and equity supply. Spreads mostly held

firm, though CLO double-Bs widened marginally.

High fixed-rate bond buckets = more MVOC volatility

Most CLOs currently have relatively moderate fixed-rate bond buckets in the 2.5-7.5%

range, though around 2 out of every 3 in-RP deals have increased theirs YTD (but mostly

only very marginally). However, 11% of Euro CLOs have fixed-rate bond buckets above

10%.

High fixed-rate bond buckets on the asset side can lead to more meaningful softening in

MVOC ratios when interest rates increase vs. deals with less exposure. For example, in

2023, deals that had entered the 2022-23 rate hiking cycle with >=15% fixed-rate bonds

ended up with triple-B MVOC ratios 3-4 ppts below the market average.

CLO equity CoC distributions can get squeezed, too

High fixed-rate bond buckets – especially when not balanced out sufficiently with a

fixed-rate double-A tranche on the liability side – can squeeze IC test cushions and CLO

equity CoC distributions as well. In 2023, in-RP deals with very high fixed-rate bond

buckets generated about 2 ppts less annual CoC vs. the broader in-RP universe.

Software & Chemicals – not out of the weeds

We review CLO holdings, industry exposure, and price distribution. Chemicals and

Software still have high <95 shares at 43% and 31%, respectively. For some Chemicals

issuers in particular we note that some of the recovery in May & June has started to

reverse.

Please also see our updated European CLO data handbook (July edition).

For further developments in the international SF markets, please see International SF

Weekly: Secondary activity is back to post-GFC unwind peak levels, and

…