Webinar Recap: Seeing the 2026 Loan Market Live & In Color
Last week, Octaura hosted a timely and candid conversation on one of the choppiest starts to a year the leveraged loan and CLO markets have seen in recent memory.
Moderated by Octaura’s Head of Markets, Howard Cohen, the discussion brought together three leading voices in loan & CLO trading:
- Alex Ford, Managing Director, Leverage Loan Trading, Bank of America
- Jen Lin, Managing Director, Head of Loan Trading, Apollo
- Amir Vardy, Head of Structured Credit, UBS Asset Management
Together, they unpacked what’s been driving volatility, how AI is reshaping risk frameworks, and where opportunities may emerge as liquidity, sentiment, and sector rotation shift minute‑to‑minute.
A market that flipped quickly.
January opened with great momentum; loans rallied nearly 70 bps in the first two weeks—before giving way to a sharp reversal. By the 29th, the market saw a 30‑cent drop, the biggest since April 2025. On Octaura, the buy‑sell mix flipped from 55% buyers to 83% sellers almost overnight.
Each panelist agreed the fast-paced volatility was likely influenced by:
- CLO calls and liquidations hitting the market
- Credit concerns bubbling up across stressed names
- Retail flows turning sharply
- AI risk suddenly accelerating
AI and the loan market scene.
If January’s first half was about M&A enthusiasm, tight spreads, and bullish positioning, the second half was all about AI repricing risk.
Everything that felt good in mid‑Jan got turned on its head.
AI‑driven questions like which businesses are exposed? Which aren’t? What does disruption look like? – spread beyond software into insurance brokers, RIAs, logistics, and beyond.
Key takeaways:
- 16% of the BSL index is software, but the effective exposure is far larger when you include software‑adjacent sectors.
- Investors began asking “What do we actually own?” and digging into names one by one.
- The result has been broad offloading of risk, dispersion widening, and a market where no pocket feels fully insulated.
- Trading felt, as Jen put it, like “a whack‑a‑mole” as sectors took turns repricing.
CLO liquidations & creations.
The group walked through the dynamics behind the elevated wave of CLO calls to start 2026:
Why calls picked up:
- A large share of loans trading above par made liquidation path more attractive than secondary equity pricing.
- Even some deals still in reinvestment got called—an unusual sign of how compressed equity valuations had become.
However, panelists noted that creation still has remained strong while warehouses are funded and liability demand is there.
What buyers want (and don’t want) right now.
The panelists noted that January was slow for CLO creation, but February is projected around $16B, with rampers putting cash to work, though not in the AI‑hit names.
Other areas of demand panelists noted are:
- Credit funds with elevated cash
- Opportunistic buyers—but only at deeper discounts
- Non‑traditional buyers sniffing around for relative value
Many large software names repriced into the 65–80 range, pulling distressed specialists into the flow, but not yet aggressively.
How managers are re-underwriting.
One valuable insight came from how Apollo has approached AI risk:
- Every portfolio name was scored low / medium / high on AI disruption risk.
- Structural protections, sponsor support, and cash flow durability all mattered.
- The goal remains to trade with a clear head during chaotic flows.
Overall, panelists agreed If you’re doing the work line‑by‑line, you can lean in where you have conviction and de‑risk where you don’t.
Sector contagion & up/down the stack risk.
The group discussed how CLOs benefit from intrinsic diversification, but when a sector runs into trouble, tranche investors move quickly:
- Identify managers that overweight the risk
- Trim exposure early
- Adjust AAA vs. mezz vs. equity tolerance accordingly
Historical parallels ranged from Oil & Gas (2014–16) to retail to COVID’s rapid‑fire repricing.
Where workflows can help.
Liquidity discovery still feels too dependent on phone calls and scattered systems.
Settlement errors, mismatched IDs, manual corrections, with still too many emails about trades breaking.
BWIC processes and documentation standardization lag behind other structured products.
The market is evolving, but the need for real‑time clarity is only accelerating.
Click here to watch the full webinar.
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