CLO Weekly — Please don't stop the Muse-ic: CLOs ability to fund the next great AI debt binge

Market Overview: Best asset to buy, best asset to sell. The 10-year UST touched 5.22%, the highest level since 2007. Trading volume remains elevated in CLOs with $10bn last week and $8bn this week as investors sell par-priced CLO paper to rotate into discount fixed-rate bonds. Spreads were modestly wider by 2bps in secondary AAA to 120bps for long bonds and 109bps for short. AI-driven data center and GPU financing could become a major new growth engine for leveraged credit, creating a potential $100bn+ opportunity for the leveraged loan market and thus the CLO market. CLO exposure in data center and GPU financing loans is currently around $4.5bn, and the bulk of the deals are secured by GPU contracts where the off-taker could be a BB or IG-rated company. Data center loans are currently priced around $98-99, while GPU financing loans are mostly above par;