U.S. securitized products market: Higher rates expose fault lines across securitized credit despite strong issuance and liquidity

Overview

This broad U.S. securitized-products outlook reviews CMBS, CLOs, consumer ABS, aviation debt and RMBS under a higher-rate backdrop. Deutsche Bank sees healthy issuance and active trading in many sectors, but identifies material refinancing, valuation and credit pressure in office CMBS, lower-rated CLO exposure and rate-sensitive mortgage products.

Core views

Commercial MBS is the report’s clearest area of stress. The 2021 SASB cohort originally issued about $84bn when rates were far lower; 29% remains outstanding, and office represents more than half of that balance and roughly two-thirds of delinquencies. Office has only an 11% payoff rate and a 14% delinquency rate, while hotel, retail and industrial balances have largely paid off. Loans entering special servicing continue to exceed resolutions: SASB transfers were about $3.5-4bn per quarter in 2026, while resolutions fell from roughly $1.9bn in Q1 to $0.6bn in Q3. The report attributes the problem primarily to refinancing at maturity rather than operating cash flow. Conduit CMBS deterioration is also pronounced. Its special-servicing rate reached 12%, above the roughly 8.5% COVID-era peak and more than double the early-2023 level; every quarter since 2023 has seen more loans enter than exit special servicing. September conduit 60+ day delinquency was 6.7%, including 11.2% for office, versus 3.3% for SASB. Maturing loans face coupons roughly 200bp above original rates, and on-time refinancing has stalled around 70%, or 45-50% for office. New appraisal reduction amounts—used as a proxy for future losses—put office implied losses above $5bn, more than all other property types combined. Across loans with appraisal reductions, average implied loss severity is 41% and roughly 22% of loans imply severity above 60%. Despite those credit stresses, CMBS supply has been substantial. CMBS issuance reached $189bn year to date, up 23% from the comparable 2025 period, including $77bn of SASB issuance, $34bn of CRE CLOs and $56bn of agency CMBS. Private-label supply of $133bn had already exceeded 2024 full-year volume, while CRE CLO issuance of $34bn exceeded 2025’s $31bn full-year total. The report notes that supply remains diversified by property type, although office and industrial are major contributors. It also observes a two-tier property-spread market: multifamily, industrial and grocery-anchored retail price around 130-160bp, while strip and mall retail, office and lodging price around 210-285bp. For CLOs and leveraged loans, Deutsche Bank argues that the rise in government yields has reversed a preceding risk rally. The 10-year Treasury rose 16bp and the five-year rose 13bp during the week discussed, while 12-month term SOFR rose 22bp to above 4.4%. The report says this worsens the outlook for borrowers already strained by the existing rate level: 10.7% of the loan market was priced below 90, and it expects higher rates to increase price pressure and credit dispersion. CLO BBB and BB bonds fell 6bp and 11bp, respectively, with pressure likely to persist in both primary and secondary CLO markets until Treasury rates stabilize. The report nevertheless identifies relative-value support for private-credit CLOs. PCLO issuance was roughly $30bn year to date, down only 10% year on year versus a 21% decline for broadly syndicated loan CLOs, and PCLOs accounted for 24% of total CLO new issuance year to date. Longer-duration insurance buyers are drawn to the asset-liability fit, while PCLO weighted-average underlying spreads were 5.1% versus 3.1% for BSL deals. PCLO BBB spreads averaged 400bp compared with 260bp for BSL BBBs, helping offset an approximately 150bp additional capital charge. However, the CLO arbitrage remained compressed at negative 22bp, and managers were granting pricing concessions, with PCLO AAA spreads averaging 155bp versus 140bp for the first 14 deals of the year. Consumer ABS collateral is assessed as broadly resilient. Deutsche Bank rates the health of the U.S. consumer a “B,” unchanged from mid-year: a 4.1% unemployment rate and better 2026 payroll growth support collateral, but inflation, higher rates, gasoline costs and slower wage growth pressure households. The report estimates that average household gasoline spending was nearly $400 higher year to date than in 2025 and notes that only 63% of U.S. adults could cover an unexpected $400 expense with cash. Even so, annualized net loss rates and 60+ delinquencies improved year on year in four of eight consumer ABS sectors. Prime auto was particularly strong, while residential solar was the main weak point, with 4.28% delinquency, 4.21% annualized net loss and 4.31% CDR. Subprime auto remained the highest-loss sector at 8.82%, albeit 18bp improved year on year. The report treats the Oracle force-majeure declaration on Project Jupiter as a development-stage data-center execution issue rather than a direct securitization problem. Delays in power delivery postpone rent commencement but do not terminate lease obligations, according to the report. It distinguishes this project from data centers in ABS master trusts and SASB CMBS, which it characterizes as stabilized, fully constructed, powered, leased, operating and cash-flowing. In aviation debt, Deutsche Bank summarizes investor and appraiser views alongside its own. Survey participants favored subordinate aircraft ABS tranches or ABS equity for the best absolute returns over the next 12 months, but selected secured airline debt for the best risk-adjusted returns. The report agrees that senior EETCs offer the strongest relative credit protection and argues their ratings are too low, citing a repayment history of more than 98%. It expects new narrowbody and widebody aircraft values to rise by at least 11% over three years, while mid-aged narrowbody values remain broadly flat and mid-aged widebody values rise 5-10%. For RMBS, higher rates are expected to keep housing activity slow, reduce refinancing and slow Non-QM originations by roughly 10-15%, while increasing demand for HELOC/CES issuance. Deutsche Bank expects only a marginal 2-5% CPR slowdown, particularly for 2025 and 2026 vintages. It says Non-QM spreads look rich after the agency-MBS selloff and estimates a historical relationship would imply approximately Treasury plus 155bp. At the same time, non-agency RMBS issuance reached $179.4bn year to date, up 21% from 2025 and 73% from 2024, driven by a 52% year-on-year increase in Non-QM issuance; Non-QM AA and BBB spreads widened 5bp week on week and BB spreads widened 15bp.

Analysis framework

The report combines issuance, trading, spreads, delinquency, special-servicing, refinancing and collateral-performance data to assess rate transmission across securitized products. It compares current readings with historical levels and prior periods, then links higher benchmark rates to refinancing costs, discounting, borrower stress, investor flows and relative value across credit structures and seniority.

Methodology notes

• OtherSpread analysis

  Spread and relative-value analysis

  The report compares tranche spreads, Treasury and SOFR moves, and differences between CMBS property types, CLO structures and RMBS sectors to explain changing valuations and investor demand.

• Industry AnalysisSupply-demand framework

  Issuance, trading and refinancing supply-demand analysis

  The report tracks new issuance, secondary volume, special-servicing inflows and resolutions to assess market liquidity, financing availability and sector pressure.

• OtherSpread and Asset-Quality Analysis

  Collateral-performance and credit-quality analysis

  Delinquencies, defaults, loss severity, payoff rates and refinancing outcomes are used to identify stress by CMBS property type and consumer ABS collateral category.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Commercial MBS

  Higher rates and loan maturities are raising refinancing and special-servicing pressure, particularly in office.

  Strengths

  Issuance remains high and diversified across property types.

  Weaknesses

  Office has elevated delinquency, low payoff rates and the largest implied losses.

  Comparison

  Multifamily, industrial and grocery-anchored retail spreads are materially tighter than office, lodging and mall retail.

  Risks

  Maturity-driven refinancing failures, special-servicing inflows and appraisal-based losses.

• CLOs and leveraged loans

  Rising Treasury and SOFR rates are weighing on prices and increasing borrower stress.

  Strengths

  CLO ETF flows and overall trading activity remain strong; PCLOs offer higher underlying spreads and duration matching for insurers.

  Weaknesses

  Junior CLO tranches and lower-rated loans sold off; arbitrage is compressed.

  Comparison

  PCLO BBB spreads averaged 400bp versus 260bp for BSL BBBs.

  Risks

  Further rate increases, price dispersion and elevated weak-credit exposure.

• Consumer ABS

  Resilient employment supports collateral despite inflation and higher borrowing costs.

  Strengths

  Prime auto performance is strong, and four of eight sectors improved year on year in annualized net losses and 60+ delinquencies.

  Weaknesses

  Residential solar and subprime auto remain areas of elevated stress.

  Comparison

  Residential solar annualized net loss was 4.21%, while subprime auto remained highest at 8.82%.

  Risks

  Inflation, gasoline costs, slowing wage growth and higher consumer borrowing rates.

• Non-agency RMBS

  Higher rates restrain housing activity, originations and prepayments while supply remains elevated.

  Strengths

  Year-to-date issuance is robust, led by Non-QM.

  Weaknesses

  Non-QM spreads look rich relative to agency MBS after the agency selloff.

  Comparison

  Non-QM AA and BBB spreads widened 5bp and BB spreads widened 15bp week on week.

  Risks

  Mortgage rates above 7%, slower originations, lower refinancing and housing-market weakness.

Key data

• Conduit CMBS special servicing12%Above the roughly 8.5% 2020 COVID peak and more than double the early-2023 rate.
• 2021 SASB balance outstanding29% of approximately $84bn cohortOffice represents more than half of outstanding balance and about two-thirds of delinquencies.
• Office implied lossesMore than $5bnAppraisal-reduction-amount implied losses exceed all other property types combined.
• 2026 CMBS issuance$189bnUp 23% year on year; includes $77bn SASB, $34bn CRE CLO and $56bn agency CMBS.
• CLO new-issue forecast$190bn for 2026Forecast split is $145bn BSL and $45bn MM/PC CLOs.
• Loans priced below 9010.7%The report uses this as a measure of elevated leveraged-loan tail risk.
• Consumer health assessmentBUnchanged from mid-year; labor-market resilience offsets growing household headwinds.
• Non-agency RMBS issuance$179.4bn year to dateUp 21% versus 2025 and 73% versus 2024; Non-QM issuance is up 52% year on year.

Impact & implications

The report portrays a securitized market with strong supply and active trading but uneven credit conditions. Higher rates are most damaging where refinancing needs, office exposure or lower-rated credit are concentrated, while consumer ABS performance, stabilized data-center securitizations and certain private-credit CLO structures retain relative support.

Risks

• Higher Treasury yields and additional policy tightening could further depress CLO, leveraged-loan and fixed-income prices.
• Office CMBS faces refinancing risk, rising special servicing and large appraisal-implied losses.
• Residential solar ABS performance is weakening, while subprime auto losses and defaults remain elevated.
• Higher mortgage rates could slow housing, Non-QM originations and RMBS prepayments.

What to watch

• CMBS special-servicing transfers and resolutions, especially for office loans approaching maturity.
• Treasury yields, SOFR and market-implied FOMC rate expectations.
• The share of leveraged loans priced below 90 and performance of lower-rated CLO tranches.
• Consumer ABS delinquency, default and net-loss trends, particularly in residential solar and subprime auto.
• Housing supply, pending home sales, days on market and seller concessions.
• Non-QM issuance, spreads and prepayment speeds.