U.S. Structured Credit 2025 Outlook

Morningstar DBRS published its U.S. Structured Credit 2025 Outlook.

Key Highlights:
-- Across our suite of structured credit asset classes, we have stable outlooks on both collateral performance and credit ratings in 2025. The credit rating outlook for the sector is stable, with structural elements, including credit enhancement, overcollateralization (OC), and reinvestment specifications, likely to mitigate credit deterioration.
-- The backdrop of strong economic growth and easing inflationary pressures is expected to bode well for U.S. corporate credit. However, tariffs pose the biggest risk of uncertainty, and lower-tiered credit obligors also remain a concern this year.
-- Collateral pools underlying our rated collateralized loan obligation (CLO) portfolio are backed by corporate credits that are typically assessed via credit estimates (CE), with CE credit performance expected to remain stable this year.

"Nonetheless, we expect to see continued dispersion and idiosyncratic risk across the private credit landscape, with lower-rated private credit borrowers being more susceptible to downward credit migration," said Jerry van Koolbergen, Managing Director, Head of U.S. Structured Credit.