Summary

• July 2025 fell short of issuance estimates but market conditions remain favorable.
• Deal execution was solid with all metrics performing well in July.
• Financials once again led all sectors while utilities saw little activity.
• Investor demand skewed toward 5–7-year tenors, long dated paper, and higher yielding instruments lower in the capital structure.
• August is expected to be lighter than previously observed activity in 2025 due to seasonal slowdowns.
• The market remains in stable condition despite some shift in sentiment late in the month and investors remain in search of additional yield.

Economics

Leadership Changes

• President Trump to nominate a new Federal Reserve Governor (replacing Adriana Kugler, resigning Aug. 8).
• Trump also to appoint a new Bureau of Labor Statistics (BLS) chief after firing Erika McEntarfer following weak jobs data.

Labor Market Weakness

• July payrolls rose by only 73,000, with the 3-month average at 35,000—the softest since the pandemic.
• May and June payrolls revised down by nearly 260,000.
• Unemployment rate rose to 2%; wage growth is flat.
• Number of first-time job seekers jumped +275,000 in July to 985,000.

Rate Cut Expectations Surge

• Following weak jobs data, rate cut odds for September rose from 47% to 87%.
• Markets are pricing in policy easing despite growing skepticism over the reliability of BLS data (due to low survey response rates).

Market Reaction

• Friday’s jobs miss sparked a Treasury rally and spread widening, but sentiment has stabilized.
• Economists debate whether 5% is the new floor for the 10Y UST amid sticky rates – posing a challenge to President Trump’s preference for lower borrowing costs.

US Treasuries

In July 2025, the U.S. Treasury curve saw a modest bear steepening as yields across the curve pushed higher, led by the front end. The 2Y yield rose 18bps to finish the month at 3.95%, reflecting a repricing of near-term Fed expectations, while the 10Y and 30Y yields climbed 13bps and 14bps to 4.37% and 4.90%, respectively. Despite the parallel shift higher in yields, the curve steepened slightly, particularly in the 5s30s segment which held above 90bps throughout the month and peaked near 104bps on July 23. The 2s10s spread also steepened mid-month before compressing back to 41.5bps by month-end. Rate volatility declined meaningfully as the MOVE Index fell from 93.5 to 79.8, a roughly 15% drop, supporting a more constructive backdrop for risk assets and IG credit issuance. Mid-month saw a brief spike in volatility and peak yields, but markets stabilized into month-end. Overall, the rate landscape reflects a shift toward “higher for longer” policy expectations, improving issuance conditions, and a more favorable setup for long-duration credit amid lower implied rate vol.

July: USD Investment Grade Credit

July 2025 featured a constructive tone in the U.S. investment-grade corporate bond market, marked by disciplined execution, resilient secondary market performance but a slowdown in issuance volume versus expectations. A total of $81.4 billion in new IG supply priced during the month, failing to reach projected volume of $100 billion. Supply was broad-based with all sectors tapping the market but heavily led by financials, and notable subordinated capital instruments.

New issue pricing conditions remained constructive throughout July. Average new issue concessions were modest, order books were generally healthy, averaging around 4.4 times covered, while spread compression from IPTs to final pricing ranged from 25 to 30 basis points. Investor selectivity remained evident, with attrition rates averaging ~24bps. Multiple benchmark deals priced at or through their secondary curves, highlighting a persistent bid for quality and scarcity but investor selectivity in search of yield has increasingly become more evident in the primary market.

Investor preference in July remained skewed toward short and long-dated paper. Approximately 28% of new issuance was concentrated in the 5–7-year tenor, while another 25% came in the 10-year and longer segment. Long bonds continued to attract insurance and pension fund demand, especially for callable and subordinated structures. Use-of- proceeds leaned toward general corporate purposes and refinancing, with M&A-related issuance lagging.

August is expected to be on the lighter side with a seasonal slowdown. Syndicate desks are calling for $95 billion for August with $25-30 billion forecasted in the first week. Market conditions heading into August remain favorable for issuers and we expect to see investors continuing to pile into strong rated names for defensive positioning as well as some focusing allocation in search of additional yield.

Economic Calendar

July 2025 Tombstones

AmeriVet Securities is pleased to have participated in Citigroup’s $2.7b PerpNC5, Morgan Stanley Private Bank’s $3b 6NC5, UBS’s $2b PerpNC5.5 and PerpNC10 and M&T Bank’s $750m 10NC5 Sub Note, reinforcing our commitment to delivering Tier II and Tier III investor access to high-quality issuers.