June Credit Snapshot

Summary

- June 2025 saw a strong follow-through from May’s momentum, with $109.8 billion in new IG corporate bond issuance – surpassing consensus forecasts of $105 billion,

despite the headwinds of summer seasonality, geopolitical risk and upcoming earnings blackouts.

- Execution remained disciplined: average new issue concessions held near 2–3bps, and books averaged 3.1x covered, with over two-thirds of deals pricing through or flat to secondaries.
- Financials once again led all sectors, making up more than 50% of monthly

issuance, with notable volume from U.S. banks, foreign FIGs, and structured vehicles.

- Investor demand skewed toward 5–7 year tenors, which accounted for 44% of total volume. Long-duration (10yr+) also remained active, while FRN activity declined sharply amid stable Fed expectations and lower front-end appeal.
- Secondary dealer-to-client flows were net positive at +$12.4B, consistent with risk- on
- July begins with stable technicals and tight valuation ranges across IG credit. Expect periodic issuance ahead of earnings season, with tone shifts likely driven by key macro events.

Economics

June’s macroeconomic landscape reinforced a steady, benign environment for U.S. investment-grade credit markets, marked by moderating inflation, a cooling labor market, and a resilient consumer. Together, these data points helped bolster the market’s conviction that the Federal Reserve is likely to remain on hold, offering a supportive backdrop for credit valuations.

Inflation data for May – reported in June – continued to trend lower. Headline CPI rose just 0.1% month-over-month and 2.4% year-over-year, with core CPI easing to 2.8%. Core PCE, the Fed’s preferred inflation gauge, came in at 0.2% MoM and 2.7% YoY. This marked the fourth consecutive month of softer-than-expected price pressures, indicating that recent tariff policies had yet to materially bleed into consumer inflation. For fixed income markets, particularly IG credit, these figures reinforced the view that the Fed can afford patience, keeping rate volatility low and supporting credit spread stability.

Labor market conditions also showed signs of softening. May nonfarm payrolls rose by just

+139K, well below the prior trend, while the unemployment rate remained unchanged at 4.2%. Underneath the surface, a decline in labor force participation hinted at slack in the job market, with jobless claims hitting their highest level since 2018. However, wage growth held steady at 3.9%, indicating muted upward pressure on corporate labor costs. This combination – slowing job gains without wage inflation – provides a favorable setup for corporate profitability and, by extension, credit fundamentals.

Consumer and business activity painted a mixed picture. Headline retail sales fell –0.9% in May, marking a second consecutive decline, driven largely by a pullback in auto sales that had previously surged in anticipation of tariffs. However, core retail sales (excluding autos, gas, and building materials) rose +0.4%, with April’s figure revised higher, suggesting that the consumer remains in decent shape. On the business side, both ISM indices disappointed: the services PMI dipped to 49.9, while manufacturing fell to 48.5, indicating slight contraction in both sectors. While not indicative of a sharp downturn, the data signaled a broadening slowdown, further anchoring the narrative of a soft landing.

Looking ahead to July, investor focus will remain on key macro data, particularly the June jobs report (due July 3) and CPI (July 15). Continuation of the current cooling trend would reinforce the soft-landing thesis and support further spread compression. Conversely, an upside inflation surprise – particularly from tariffs or energy – could revive rate volatility and challenge the current pricing regime. The July 29–30 FOMC meeting will also be closely watched. While no rate move is expected, markets will look for updated guidance, especially in light of speculation that Fed leadership changes could tilt policy more dovish.

U.S. Treasuries

In June 2025, U.S. Treasury markets underwent a rally across the curve, marked by a drop in yields and a bull steepening in the curve. The 2-year Treasury yield declined by over 30 basis points, falling from 4.04% in early June to 3.73% by month-end. The 10-year yield similarly fell by about 25 basis points, while the 30-year yield saw a more modest 16 basis point decline. The flatter response in the long end suggests that long-run inflation expectations remain anchored and that the decline in yields was more policy-driven than a signal of deflationary risk.

The 2s10s spread settled ~25 basis points above the open of the month, while the 5s30s spread steepened from 95 basis points to ~99 basis points. The MOVE Index, which serves as a barometer for Treasury rate volatility, fell from near 100 at the start of the month to just above 90 by June 30th.

The intersection of falling yields, steepening curves, and less volatility forms a constructive setup for credit spread stability or modest tightening, assuming no shocks disrupt the current macro glide path.

June: USD Investment Grade Credit

June 2025 featured a steady and constructive tone in the U.S. investment-grade corporate bond market, marked by healthy issuance, disciplined execution, and resilient secondary market performance. A total of $109.78 billion in new IG supply priced during the month, outpacing the $105 billion estimate from syndicate desks. This performance reflected continued reopening momentum following the volatile conditions of April and robust market participation seen in May. Supply was broad-based but led by financials, with strong participation from U.S. and foreign banks, insurance-linked vehicles, and subordinated capital instruments. Industrials and utilities also contributed meaningfully, while technology issuance moderated.

New issue pricing conditions remained constructive throughout June. Average new issue concessions were modest and tightened as the month progressed, aided by stable Treasury rates and consistent real money demand. Order books were generally healthy, averaging around 3.1 times covered, while spread compression from IPTs to final pricing ranged from 25 to 30 basis points. Investor selectivity remained evident, with attrition rates ranging from 20% to 35% on larger multi-tranche transactions. Multiple benchmark deals priced at or through their secondary curves, highlighting a persistent bid for quality and scarcity. Notably, offerings from Mizuho Financial Group and Sumitomo Mitsui Financial Group priced through their secondary curves, underscoring the strength of demand in the U.S. dollar market for high-quality foreign financial paper.

Investor preference in June remained skewed toward intermediate and long-dated paper. Approximately 44% of new issuance was concentrated in the 5–7 year tenor, while another 13% came in the 10-year and longer segment. Long bonds continued to attract insurance and pension fund demand, especially for callable and subordinated structures. Activity in floating-rate notes slowed further, as the appeal of front-end exposure diminished amid a steady Fed policy backdrop and flat curve dynamics. Use-of-proceeds leaned toward general corporate purposes and refinancing, with M&A-related issuance remaining muted for the second consecutive month.

Secondary market activity remained elevated, with over $1.03 trillion in reported TRACE trading volume. Financials led sector flows with $337 billion, followed by Consumer Discretionary at $119 billion and Energy at $103 billion. Dealer-to-client net flow was a solid +$12.4 billion, consistent with active portfolio rotation and broad participation from asset managers. Meanwhile, dealer-to-affiliate flows were net negative by $9.2 billion, suggesting that real-money accounts were selling into strength while dealers took on risk. A notable late-month surge in trading occurred on June 28 and 30, likely driven by quarter-end positioning and strong performance in recent new issues.

Credit quality dynamics showed persistent demand for intermediate risk. Investment-grade rated issuance continued to dominate, with strong participation in both the A1–A3 and Baa1– Baa3 rating buckets. The 3–7 year segment once again led all maturities, with robust net buying by institutional investors seeking roll-down and carry opportunities. In contrast to May, long-dated paper (12 years and longer) saw modest net inflows in June, suggesting some asset allocation rotation into duration. The 1–3 year segment remained active, but flows were more balanced as investor preference remained skewed toward the belly of the curve.

Valuations continued to firm across June. The Bloomberg U.S. Corporate OAS (LUACOAS) tightened to +83bps, the lowest close since February, and below both its 1-year and 3-year averages. IG yield to worst (LUACYW) declined to 4.99%, marking its lowest point since early March and reflecting reduced yield premiums even as nominal Treasury rates held steady. The CDX IG 5-year index tightened nearly 6bps to close at 51.06bps, a year-to-date low that signaled declining systemic credit risk. Meanwhile, the Bloomberg U.S. Corporate Total Return Index (LUACTRUU) closed the month at 3426.76, capping off a strong rebound in total return performance across IG credit.

July: Investment Grade Outlook

July is traditionally a lighter month for U.S. investment-grade issuance due to the July 4th holiday week, the onset of Q2 earnings blackouts, and broader summer seasonality. That said, given the strong finish to June and ongoing technical support, syndicate desks are projecting $90-105 billion in gross supply for July 2025. Financials, large-cap corporates with pre-earnings windows, and occasional opportunistic issuers (especially in the BBB cohort) are expected to anchor monthly supply. Additionally, with June showing tight execution and strong book momentum, issuers may look to capitalize on current levels before rate volatility or risk sentiment shift.

Key Risks & Watchpoints

Key Economic Releases – risk of hotter-than-expected prints.
Q2 earnings season – especially financials (kick off mid-July), could influence credit outlook and issuance windows.
Geopolitical volatility – including tariff developments and global central bank policy shifts.
Fed commentary – if July Fed minutes or Chair Powell’s communication hints at reacceleration in rate cuts, risk assets could reprice positively.

Economic Calendar

CENTRAL BANK

June Deals

AmeriVet Securities is pleased to have participated as Co-Manager on Ares Strategic Income Funds $1.1b 2-part debt offering, Mizuho’s $3b 3-part debt offering, and SMFG’s $4b 5-part debt offering, bringing over 200mm in indications of interest, reinforcing our commitment to delivering Tier II and Tier III investor access to high-quality issuers.