Leveraged loan default rates continue to fall to exceptionally low levels.12 months after hitting peak cycle highs of 4.2% (2.6% Europe), S&P’s ELLI and LLI trailing 12m default rates have fallen to 10-year lows with the US at 0.4% now trending 50% lower than Europe.

This improving trend is replicated too in CLO leveraged loan portfolios. Both Reported and DBRAL trailing 12m default rates have witnessed a further marked improvement with US default rate measures remaining marginally lower than Europe. The former metric is derived from defaults defined in CLO documentation, while the latter is designed to provide a more comprehensive picture of credit risk in CLOs but has no direct impact on OC tests or other cashflow drivers in deals.