Deutsche Bank-US Credit Strategy $-Credit Supply Monitor

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 03/06/2025 14:26:31 GMTDistributed on: 03/06/2025 14:26:31 GMT3 June 2025Deutsche BankResearch North America Credit Strategy US Credit Strategy Date $IG gross issuance is near last year’s run rate even as net supply has lagged significantly n$IG gross supply accelerated in May, with $152bn of issuance, after a slower April. This was split nearly evenly between Financials ($77bn) and Non-Financials ($75bn). Following the pickup in supply last month, gross metrics are running in line with last year’s run rate, while larger-than-average levels of redemptions are keeping net supply significantly lower. We are now past the majority of the redemptions that are linked to the 5-year anniversary of the Covid-era surge in issuance, and so we could see net supply start to rise again after being flat for several months.nThe trend of more short-dated issuance has continued. The rolling 6-month share of 30yr Non-Financial issuance is nearly the lowest in a decade, while the share of Financial issuance with tenors less than 7yrs is near a record high as well. This highlights both the expectation that issuers foresee lower rates in the medium term as well as the lack of M&A (Fig. 7& 8). May also saw higher-rated issuance, as $AA and $As made up a greater than normal share of $IG supply (Fig. 9 & 10). n$IG supply typically starts to slow in June but there are upside risks. All-in $IG yields ended May near the lows of the month and below average YTD, and so issuers may try and pull forward some issuance while market conditions are relatively benign. Concerns about higher long-term yields on the back of higher deficits linger and could lead to more supply in the short-term. The key for net supply will be how much discretionary supply comes, as we saw both in April and May.nTechnical conditions for $IG could be less positive this month if supply continues to be stronger as issuers try to come to market while things are calmer. There is just an average amount of cash flows this month with just over $100bn returning to investors from coupons, maturities, and tenders (Fig. 18) expected this month, while we could see near $120bn of issuance ( Fig. 17).$HY gross supply picked up again as net supply remains historically low nAfter a quiet April, $HY issuance jumped to $29.8bn last month, which is the largest monthly sum since October (Figs 19 & 21). $HY net supply last month ($14.3bn) was the largest since September, as we are now past the Karthik NagalingamUS Credit Strategist+1-212-250-0521Steve CaprioHead of European and US Credit Strategy+44-20-754-16176Asim KaulResearch AssociateEmilie CalderEuropean Credit Strategist+44-207-330-7500Deutsche Bank Securities Inc.IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.$-Credit Supply Monitor 3 June 2025US Credit Strate