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software: US Stocks: Debt investors offloading exposure to software stocks is latest sign of pain

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software: US Stocks: Debt investors offloading exposure to software stocks is latest sign of pain
Investors are offloading software loans in debt vehicles at a discount, in the latest sign of pain in the software industry, which is being upended by AI.

In recent weeks, several managers of collateralized loan obligations (CLOs) have started exploring ways to reduce their exposure to software, as they grapple with the prospect of a wave of rating downgrades on junk bonds and potential defaults down the line, according to three CLO managers and several credit industry analysts.

The push to reduce exposure shows how the pain in private ​credit and software is still working through the system after the software rout in January and February that was largely triggered by the release of Anthropic’s latest AI tools, which raised fears of widespread disruption across the technology and professional services industries.

“Software is a sector where there is more selling coming from CLO managers than there is buying right now,” said Jim Egan, co-head of securitized products research at Morgan Stanley, adding that there was elevated exposure to software within broadly syndicated loans (BSLs), which are corporate loans that are arranged by investment banks and sold to a wide group of credit investors ‌like CLOs. Egan added CLOs currently ⁠have lower exposure ⁠to riskier companies, which are “CCC” rated, compared to a year ago.

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CLOs, which buy up small chunks of numerous individual leveraged loans, in recent years capitalized on the credit boom and bought up loans that backed hundreds of software buyouts in the height of a dealmaking boom during and after the pandemic. During the same period, CLOs ​also hoovered up their holdings in other non-software sectors that are now faced with the existential threat emerging from AI. According to initial estimates from JPMorgan analysts, around $40 billion to $150 billion of U.S. CLO holdings fall within sectors that are most associated with AI risk.


The software ​and services sector accounts for about 15% of the collateral in currently outstanding syndicated CLO deals in the U.S., according to a Feb. 20 estimate from Morgan Stanley, which added that software alone makes up roughly 12% of CLO holdings, making it the single-largest subsector by concentration. Software exposure in direct lending is estimated to be about 19% based on private-credit focused CLOs, Morgan Stanley said in a March 17 note.
WIDENING SPREADSSpreads on CLOs, which are the risk premium that companies pay on the bonds over Treasuries, have widened over the past few weeks as fears of a meltdown in the $1.8 trillion private credit industry have spooked investors.

“We’re seeing some CLO managers reduce exposure to software – particularly ⁠where positions ‌were overweight or ahead of refinancing activity,” said Al Remeza, associate managing director at Moody’s Ratings. “At the same time, many view the current environment as a buying opportunity, especially for companies they believe are least vulnerable ​to AI disruption.”

A mix of investment-grade notes – which are senior unsecured corporate bonds – and high-yield leveraged loans of some software makers, including Intuit, Dayforce, and Citrix, were sold between a range of 89 cents and 98 cents on the dollar ⁠in late February and earlier in March, according to data compiled by the Trade Reporting and Compliance Engine (TRACE), which was developed by the Financial Industry Regulatory Authority to track over-the-counter fixed-income transactions.

A few months ago, those same bonds and loans were trading at a premium, the data shows. Reuters could not determine ​which specific software companies CLOs sold. Dayforce and Citrix did not respond to requests for comment.

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To be sure, while spreads across the software industry have widened, the spread on Intuit’s investment-grade bond that matures in 2033 is largely in line with the level at which it was issued in 2023, while its credit rating was upgraded to ‘A’ from ‘A-‘ by S&P Global in October last year. Intuit’s shares are down about 32% so far this year, as AI disruption fears have weighed broadly on the enterprise software industry.

“We bet the entire company on data and AI nearly ten years ago, when we declared our strategy to be an AI-driven expert platform to deliver done-for-you experiences. Our strategy is working; in the first half of our fiscal year 2026, we delivered 18 percent revenue growth while expanding margins,” an Intuit spokeswoman said in an email to Reuters.

ASSESSING AI RISK

While the current bout of selling could present a unique buying opportunity for distressed debt investors, several credit industry analysts cautioned that the buyer base for large swathes of these loans is ‌thin, adding that most large private credit firms and direct lenders are unlikely to participate in large software loan deals in the near term as they grapple with investor scrutiny amid rising redemption requests at their flagship funds.

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“The majority of the CLO community is really taking its time to think about how to come up with a framework to assess AI risk, more on the single-name level, to really scrub their ​book to identify which are the ​names that are more prone to AI risk,” said Joyce Jiang, head ⁠of U.S. CLO Research at Morgan Stanley. “They’re still in the middle of doing that, so in the near term we think it’s not likely that there’s going to be dip buying from the CLO community at a full scale.”

This is likely to be exacerbated by the fact that CLO managers, who have relatively less exposure to software, are not yet seeing a strong enough reason to buy up loans that are coming to market, said Gavin Zhu, head of U.S. CLO Research at Barclays.

“It’s ​a bit more difficult to suddenly and opportunistically rotate back into software without a true catalyst. And I think that might be contributing to some of the continued weakness that we see on the loan side,” said Zhu.

Global CLO loan supply is expected to fall to about $150 billion this year, which would mark a 25% decline from last year, according to estimates from JPMorgan. This is because of a sharp decline in investor demand, as widening spreads, question marks over loan quality, and fears of deepening cracks in the multi-trillion-dollar credit market weigh on sentiment, experts said.

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However, not all CLO managers are rushing to dump software loans at steep discounts. Credit fund managers and analysts said the recent selling activity, so far, has been selective and concentrated around relatively better-performing loans that have changed hands at a modest discount.

Rishad Ahluwalia, head of CLO Research at JPMorgan, said investor sentiment has turned more bearish in recent weeks as spreads have widened and CLO transaction volumes have dipped.

“For CLO managers, the appetite for stressed loans in orphan sectors, like software and services, is weaker,” said Ahluwalia.

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Investment scams cost West Australians $13.7m in losses

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Investment scams cost West Australians $13.7m in losses

Investment scams were the leading method used to fleece West Australians in 2025, accounting for $13.7 million in losses.

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Crude above $100: The danger zone for Indian stocks and why the next 2 weeks are critical

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Crude above $100: The danger zone for Indian stocks and why the next 2 weeks are critical
With crude oil sticking above the $100 barrel mark, India’s market resilience faces a countdown. Geojit’s Chief Investment Strategist Dr. V K Vijayakumar warns that while the economy can absorb a temporary shock, a prolonged two-week spike threatens a domino effect on inflation and GDP. As geopolitical tensions simmer, the window for a “painless” recovery is closing, leaving investors on high alert.

Edited excerpts from a chat on market outlook and opportunities:

Crude oil prices have been hovering above $100 a barrel mark. At what level, do you think the India equity story starts becoming meaningfully uncomfortable for investors?
For an oil importer like India, the impact of high oil prices can turn out to be very adverse if the prices remain elevated for an extended period. A 10% increase in crude (estimated roughly at $10) causes about 20 bp reduction in GDP growth, 30 bp increase in CPI inflation and 30 to 40 bp increase in current account deficit.This adverse macro impact will manifest if the crude price remains elevated for long. In the ongoing crisis, the durability of the crisis is significant. If the war ends soon (it can end any time) or if there is significant de-escalation and opening of the Hormuz Strait, crude can immediately fall to $80 level. In such a scenario, the adverse impact will not manifest. Another two weeks of crude above $100 is a temporary shock which the Indian economy can absorb. But beyond that, the economy and markets will be impacted.


Do you think the market is still underpricing the second-order effects of war, especially on inflation expectations, bond yields, and consumer sentiment?
The market is even now discounting a quick end to the war and cooling of oil prices. The market is not discounting a prolonged war and elevated crude oil price for long. Contrary to market expectations, if the conflict escalates and crude rises above $120 and remains at that level for many weeks, the market will further correct from the present levels. Everything boils down to how long the conflict continues, more importantly, how long Hormuz Strait remains restrictive.
How vulnerable is Q4 earnings season to this backdrop? Which sectors do you expect to show the sharpest earnings impact in Q4 from elevated crude and freight costs?
Q4 is unlikely to impact earnings significantly. The impact will be felt in Q1 FY27. However, the war and the consequent uncertainty will show up in some segments. Industries using petroleum inputs like paints, adhesives, and tyres will be hit. Manufacturers using LNG as fuel like verified tiles have been hit hard. Exporters will gain from currency tailwinds. IT will gain; but the Anthropic shock will continue to weigh on the segment. Exporters to the Gulf region will be impacted marginally.

Do you expect another round of earnings downgrades over the next few weeks if oil stays elevated?
If crude remains elevated and gas availability restrictions continue, another round of earnings downgrade will become inevitable. Earnings downgrades will be in import intensive and crude related segments mentioned earlier.

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Has the small cap correction created genuine value, or are pockets of the segment still frothy despite the damage?
Correction in small caps has opened value in many segments. Broadly small cap valuations continue to be high, but there are segments with attractive valuations and high growth prospects. These are across industries and, therefore, stock selection holds the key to successful investment. An ideal strategy would be to invest in small cap mutual funds.

How are you thinking about banks in this setup, especially if higher inflation complicates the rate outlook?
Banking is one segment that is attractively valued now. Sustained selling by FPIs in leading large private sector banks has made the valuations in the segment attractive. This segment is an excellent long-term buy for investors. Credit growth in the economy continues to be good. The MPC is unlikely to increase the interest rates soon since inflation arising from supply shocks cannot be addressed through rate hikes.

Help us understand why PSU bank stocks have been the worst hit and whether one should be brave enough to buy the dip as the growth story looks promising but yields are playing spoilsport?
PSU bank stocks had a good run recently. What we are witnessing now is profit booking in the segment. This segment can be considered selectively for investment.

If the market was to rebound from here, which sectors do you think will lead the rally?
In the event of a sharp bounce back in the market, all beaten down but fundamentally strong stocks will rally smartly. But if FPIs continue to sell the rally, large cap banking names may continue to disappoint despite the strong fundamentals and attractive valuations. IT appears set for a tactical bounce back in April since the Q4 results are unlikely to disappoint. Automobiles and auto ancillaries are on a strong wicket. Telecom will remain resilient. Pharmaceuticals have potential to appreciate.

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Ben Roberts-Smith arrested over alleged war crimes

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Ben Roberts-Smith arrested over alleged war crimes

UPDATED: Former SAS soldier Ben Roberts-Smith has been arrested in relation to a war crimes investigation and is expected to be charged with five counts of murder.

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China targets Taiwan’s chip prowess to evade global ’containment’, Taipei government says

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China targets Taiwan’s chip prowess to evade global ’containment’, Taipei government says


China targets Taiwan’s chip prowess to evade global ’containment’, Taipei government says

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Cardiff Oncology Stock: Market Dismisses Onvansertib’s Potential In Colorectal Cancer

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Cardiff Oncology Stock: Market Dismisses Onvansertib's Potential In Colorectal Cancer

This article was written by

Biologics is a full-time healthcare investor who developed a passion for biotech and life saving therapies after working in the medical field for years. His trade focus is around innovative companies developing breakthrough therapies and/or pharmaceuticals with catalysts for potential acquisitions.
He is the leader of the investing group Compounding Healthcare. Features of the group include: Several model healthcare portfolios, a weekly newsletter, a daily watchlist, and chat for dialogue and questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of CRDF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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February 2026 Export Growth Slows as Imports Reach 50-Month Peak

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February 2026 Export Growth Slows as Imports Reach 50-Month Peak

In February 2026, Thai exports grew 9.9%YOY, driven by electronics and the US market, while imports surged 31.8%YOY. Middle East conflict and US tariffs pose risks, potentially worsening Thailand’s trade deficit.

Thai Export Performance in February 2026

Thai exports in February 2026 slowed to a growth of 9.9% year-on-year (YOY), with a total export value of USD 29,439.7 million. This was a significant deceleration from January’s 24.4% YOY surge and below forecasts. The export slowdown was coupled with a sharp 11.1% month-on-month seasonal adjustment contraction. Electronics led exports, expanding over 56.8% YOY due to global demand and investment in related industries, especially to the US, where exports rose 40.5%. Gold exports grew moderately by 18.2%, affected by falling global prices.

Import Trends and Trade Balance

Imports surged to USD 32,273.3 million, the highest in 50 months, rising 31.8% YOY, driven mainly by raw materials, intermediate goods, and capital goods like gold and electrical machinery. This import growth intensified the trade deficit, which reached USD -2,833.6 million in February, with a cumulative deficit of USD -6,137.1 million for the first two months of 2026.

Outlook and External Challenges

Thailand’s trade outlook faces challenges from the Middle East conflict and rising US import tariffs. The Middle East conflict, though limited in direct impact, may affect key export sectors and energy costs, worsening the trade deficit. Meanwhile, ongoing US tariff investigations under Section 301 pose export risks. The Ministry of Commerce projects 2026 export growth scenarios ranging from -3% to +1.1% YOY. SCB EIC will update economic forecasts by March’s end amid these evolving uncertainties.

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MLG books contracts worth $20m

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MLG books contracts worth $20m

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Mach Natural Resources unitholders price 9M unit offering at $13.05

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Fund managers back large-caps, stay wary of mid- & small caps

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Fund managers back large-caps, stay wary of mid- & small caps
After the market sell-off, fund managers are broadly aligned on one message: share valuations are no longer stretched, but it’s still not the time to make aggressive bets. The decline in equities has narrowed India’s valuation premium, removed excess froth in overheated segments and brought large-cap stocks back to more comfortable levels, according to chief investment officers of six mutual funds. They remain sceptical about the prospects of mid-cap and small-cap stocks.

Fund Managers Back Large-Caps, Stay Wary of Mid- & Small CapsAgencies
Fund Managers Back Large-Caps, Stay Wary of Mid- & Small CapsAgencies

Most managers are advising investors to stay invested but stagger their entries, using systematic or phased allocation strategies rather than chasing a quick rebound.

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Apple’s foldable iPhone encounters engineering snags, faces potential shipment delays, Nikkei Asia reports

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Apple’s foldable iPhone encounters engineering snags, faces potential shipment delays, Nikkei Asia reports


Apple’s foldable iPhone encounters engineering snags, faces potential shipment delays, Nikkei Asia reports

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