Demand surge has been priced in: securitization spreads are near historical lows, and 2H26 will rely more on carry and security selection

Overview

This is Deutsche Bank's mid-2026 outlook for the securitization market, covering macro supply and demand, CMBS, CLO, ABS, transportation ABS, and RMBS. The core judgment is that a "demand surge has been priced in": issuance volume is high but net supply is limited, while insurance, annuity, and IG credit fund flows support demand for securitized products; at the same time, spreads are already near historical lows, and high interest rates and credit dispersion make second-half returns more dependent on carry, capital-structure selection, and sector security selection.

Core views

The report maintains a constructive view on securitized credit. On the macro side, DB expects U.S. real GDP growth of 2.2%, unemployment around 4.3%, and core PCE at 3.0%; the Fed may stay on hold for an extended period with risks tilted toward hikes, and the 10-year Treasury is forecast at 4.7%. On supply and demand, total issuance in 2026 may exceed $1 trillion, but net supply is only about $270 billion, and fund inflows should be sufficient to support the market. In relative value, securitization is expected to outperform corporate bonds through carry, with Non-QM seen as a potential outperforming sector and CLO carry viewed as attractive. On risks, pressure in CMBS offices and multifamily, liquidation loss severity, tail risk in CLO junior tranches, and refinancing pressure from high rates are the main constraints.

Analysis framework

The report combines top-down macro rate assumptions with bottom-up analysis of securitization sectors, comparing issuance, net supply, investor fund flows, spread ranges, trading activity, delinquency rates, refinancing success rates, liquidation loss severity, and pricing across capital-structure tranches to assess the sources of return and risk exposure for different securitized assets in 2H 2026.

Methodology notes

• Macro scenarioDB Economics View

  Scenarios for GDP, unemployment, core PCE, the 10-year U.S. Treasury, and the federal funds rate

  Uses economic resilience, sticky inflation, and the rate path to set the base case for securitization supply-demand and credit performance.

• Supply-demand technicalsTotal issuance and net supply analysis

  Total issuance, net supply, insurance capital, annuity inflows, and IG fund inflows

  By comparing more than $1 trillion in total issuance with about $270 billion in net supply, the report assesses the strength of fund-flow support for spreads.

• Relative valueSpread and carry comparison

  Securitization spreads, corporate bond spreads, AAA/BBB tranches, carry, and security selection

  With spreads in most credit sectors already at relatively tight levels, the report views coupon income and structural security selection as the main sources of return in the second half.

• Credit riskDelinquency, refinancing, and liquidation loss framework

  60+ delinquency rates, refinancing success rates, loan modifications, liquidation volume, and loss severity

  This framework is used to identify the process by which CMBS credit pressure shifts from delay and extension toward actual loss recognition.

• Structured financeCapital stack and buyer composition analysis

  AAA, senior tranches, mezz, BBB/BB, insurance buyers, bank buyers, and hedge fund buyers

  The report evaluates demand strength, spread compensation, and tail risk across different securitized bonds by capital-structure tier and buyer type.

Asset mapping & comparison

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

• Securitized credit overall

  The report maintains a constructive view for 2H 2026.

  Strengths

  Net supply is limited, demand from insurers, annuities, and IG funds is strong, and carry remains attractive.

  Weaknesses

  Spreads are near historical lows, leaving limited room for further tightening.

  Comparison

  Expected to outperform corporate bonds mainly through carry rather than a sharp compression in spreads.

  Risks

  Higher oil prices, sticky inflation, rising rates, war, and tariff rebates may weigh on consumption and credit.

• CMBS

  Technicals are supported, but credit pressure is shifting from extension to realization.

  Strengths

  High AAA yields, insurance demand, and improved bank participation in senior tranches support demand; SASB offers better transparency and sponsor selection than conduit.

  Weaknesses

  Conduit refinancing success rates are only in the high-60% range, while office refinancing success is about 45-50%; delinquencies in office and multifamily are rising.

  Comparison

  The report prefers SASB mezz over conduit on a relative basis; AA/A conduit offers 40-110bp of spread compensation versus single-A corporate bonds.

  Risks

  BBB- conduit pricing at 410-535bp reflects significant tail risk, liquidation loss severity is rising, and loan modifications may delay loss recognition.

• CLO

  Carry remains attractive, but pressure from junior tranches and loan-credit dispersion is increasing.

  Strengths

  Refis are strong, secondary trading is active, and CLO carry is considered attractive.

  Weaknesses

  New issuance and resets are down YoY, BBB/BB are wider than at the start of the year, and the loan market is showing pronounced differentiation by sector, size, and rating.

  Comparison

  Compared with newer-vintage BBB new issue, BBB reset trades at a discount and is viewed as a relative value opportunity.

  Risks

  High rates create refinancing pressure, while loan defaults, downgrades, private-credit concerns, and credit tail risk may weigh on junior tranches.

• ABS and Non-QM

  Issuance is rising and relative value is favorable, with Non-QM seen as a potential outperforming sector.

  Strengths

  Consumer credit remains resilient, non-agency mortgage origination supports growth, and ABS tightening has lagged corporate bonds.

  Weaknesses

  The report slightly downgrades the consumer credit backdrop from B+ to B, indicating a more mixed credit picture.

  Comparison

  ABS is attractive relative to corporate bonds because its spread tightening has lagged.

  Risks

  If consumer spending is hit by oil prices, interest rates, or slower employment, deeply subordinated and some consumer-related sectors may come under pressure.

• Transportation and aviation ABS

  Aviation ABS issuance in 2026 is likely to reach a record.

  Strengths

  Airlines are on track for a fourth consecutive year of profitability, aircraft markets are tight, and most aircraft values are above 2019 levels.

  Weaknesses

  This sector is sensitive to travel demand, financing conditions, and asset-valuation cycles.

  Comparison

  Spreads tightened in 2025 and have continued to tighten so far in 2026.

  Risks

  War, rising oil prices, and macro slowdown may affect airline profitability and asset cash flows.

• RMBS

  The report emphasizes that AAA is suitable for carry and roll, while BB depends more on deleveraging and rating upgrades.

  Strengths

  Non-agency RMBS is an important contributor to market growth, supported by non-agency mortgage origination and housing wealth.

  Weaknesses

  High rates limit refinancing activity, and some borrowers' prepayments and credit performance require continued monitoring.

  Comparison

  Relative to corporate bonds, securitized RMBS returns depend more on structural cash flows and tranche selection.

  Risks

  Changes in home prices, employment, interest rates, and prepayments may affect performance across different tranches.

Key data

• 2026 securitization total issuance forecast>1万亿美元Private-label issuance is about $925 billion, close to the 2025 record of $909 billion; including Agency CMBS, the total is expected to exceed $1 trillion.
• Net supply约2700亿美元Far below the headline supply of $1 trillion and a key support for securitization technicals.
• Fund inflows约5000亿美元IG信用资金流入Including about $300 billion of annuity inflows and about $200 billion of IG mutual fund and bond fund inflows, of which securitization is expected to receive about $200 billion.
• DB real GDP forecast2.2%If oil rises to $150/bbl, real GDP could fall to 1.75%.
• Core PCE forecast3.0%The report believes the narrative of disinflation is not sufficiently convincing.
• 10-year U.S. Treasury forecast4.7%The Fed is expected to stay on hold for a prolonged period, with risks tilted toward hikes.
• Insurance institutions' securitization holdings超过1万亿美元Including about $200 billion of non-agency CMBS, about $186 billion of non-agency RMBS, about $311 billion of CLO, and about $398 billion of ABS.
• PL CMBS issuance forecast1600亿美元Raised from $155 billion, with SASB and CRE CLO as the main drivers, while conduit issuance is constrained by refinancing economics.
• CMBS AAA spread outlook75-80bpExpected to remain range-bound; BBB spreads may widen by about 50bp.
• Conduit 60+ delinquency rate约6%Up from about 4.5% at the start of 2025; office 60+ delinquency is about 11%, above roughly 7% in December 2024.
• CMBS liquidation loss severity2026 YTD约66%Above about 40% in 2021-2022 and about 55% in 2025; retail-sector loss severity is close to 80%.
• CLO primary market新发行和Reset均下降约20%Refi is up about 20% YoY, while private-credit CLOs lag last year by about 10%.
• CLO secondary marketTRACE交易量同比+35%U.S. CLO ETF retail inflows are about +25%, but BBB and BB are still wider than at the start of the year.
• RMBS and CLO trading volume分别同比+57%和+32%2026 YTD versus the same period in 2025; ABS trading volume is down 16% and CMBS down 13%.
• Basel III securitization capital requirement高级档风险权重下限15%，p factor为0.5The report believes this is favorable for banks returning as buyers of senior securitization tranches.

Impact & implications

For investors, the message of the report is that the securitization market still benefits from strong demand and carry support, but spreads are already tight, so one cannot simply rely on beta-driven upside. Portfolio construction should place more emphasis on high-grade carry, spread compensation relative to corporate bonds, sector differentiation, and loan-level credit quality. In CMBS, particular focus is needed on distinguishing SASB, conduit, office, and multifamily risks; in CLO, investors need to distinguish senior-tranche carry from BBB/BB tail risk; ABS and Non-QM are more attractive in relative value, but deteriorating consumer credit means deeply subordinated bonds still warrant caution.

Risks

• Oil rising to $150/bbl could weigh on consumer spending and drag real GDP growth down to 1.75%.
• A scenario of core PCE at 3.0% and the 10-year U.S. Treasury at 4.7% implies persistently high rates, with Fed risks tilted toward hikes.
• High interest rates put pressure on CLO and CMBS refinancing, potentially limiting issuance and reducing refinancing success rates.
• CMBS office and recently multifamily loan delinquencies are rising, and liquidation loss severity is above past-cycle levels.
• CMBS governance has structural weaknesses, including control-right conflicts, opaque loan modifications, delayed loss recognition, and excessive discretion in document interpretation.
• CLO BBB and BB bonds are wider than at the start of the year, and loan-market dispersion may widen performance gaps across managers' portfolios.
• Consumer credit has been downgraded from B+ to B; while still a positive backdrop, this will affect a few sectors and deeply subordinated securities.
• If concerns related to private credit and BDCs spread, risk appetite for CLO, ABS, and CMBS may be pressured.

What to watch

• Whether primary market issuance increases in 2H 2026, especially whether the forecasts of $925 billion in private-label securitization and $160 billion in PL CMBS can be achieved.
• Annuity sales, insurance-company allocations, IG fund inflows, and bank participation as buyers of AAA senior tranches.
• Whether the path of the 10-year U.S. Treasury, Fed policy, core PCE, and oil prices changes the high-rate base-case scenario.
• Whether AAA and BBB securitization spreads remain stable or begin to diverge amid macro and rate uncertainty.
• 60+ delinquency rates in CMBS conduit and SASB, office refinancing success rates, multifamily exposure, and liquidation loss severity.
• Whether loan modifications, A/B modification, independent appraisals, and loss disclosure improve CMBS price discovery.
• CLO new issuance, refi, reset, TRACE trading volume, ETF retail inflows, and the trend in BBB/BB spreads.
• Prepayments, consumer credit, deeply subordinated performance, and spread compensation versus corporate bonds in ABS, Non-QM, and RMBS.