2026 US Senior Loan and CLO Market Outlook

Summary

• 2025 delivered solid year-to-date loan returns, albeit below our expectations, driven by robust coupon, partly offset by price erosion.
• We expect approximately 7.0-7.5% loan returns in 2026,1 again carried by coupon income and augmented by minor price appreciation.
• We forecast an approximate 4% default rate in 2026 stemming mostly from opportunistic distressed exchanges and those dictated by impending maturity/liquidity needs.

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1 Source: Invesco as of November 30, 2025. There is no guarantee that the forecast will be realized.
Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Many senior loans are illiquid, meaning that the investors may not be able to sell them quickly at a fair price and/or that the redemptions may be delayed due to illiquidity of the senior loans. The market for illiquid securities is more volatile than the market for liquid securities. The market for senior loans could be disrupted in the event of an economic downturn or a substantial increase or decrease in interest rates. Senior loans, like most other debt obligations, are subject to the risk of default.
 

Important information
These materials may contain statements that are not purely historical in nature but are “forward-looking statements.” These include, among other things, projections, forecasts, estimates of income, yield or return or future performance targets. These forward-looking statements are based upon certain assumptions, some of which are described herein. Actual events are difficult to predict and may substantially differ from those assumed. All forward-looking statements included herein are based on information available on the date hereof and Invesco assumes no duty to update any forward-looking statement. Accordingly, there can be no assurance that estimated returns or projections can be realized, that forward-looking statements will materialize or that actual returns or results will not be materially lower than those presented.

All data provided by Invesco unless otherwise noted. All data is USD and as of November 30, 2025, unless otherwise noted.
This document is written, unless otherwise stated, by Invesco professionals. The opinions expressed herein are based upon current market conditions and are subject to change without notice. This document does not form part of any prospectus. This document contains general information only and does not take into account individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. Neither Invesco Ltd. nor any of its member companies guarantee the return of capital, distribution of income or the performance of any fund or strategy. Past performance is not a guide to future returns. This document is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments.

Invesco Senior Secured Management, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities.

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