March Credit Snapshot

Summary

March 2025 was the fourth busiest March since 2016, behind 2020, 2021, and 2022
March 2025 exceeded issuance projections with herd-like activity from issuers due to market volatility
New issue premiums slightly elevated, credit fundamentals and deal execution remain stable
Strong demand across the curve for investment grade (IG) credit to capture absolute yields
Issuers and investors will continue to brace for volatility and uncertainty in markets for April
April 2025 IG supply expected to perform well, matched by investor demand for extra yield

March 2025

An unfavorable issuance backdrop was the theme of the month as volatility forced syndicate desks to tactfully navigate the market to meet their clients funding needs. Despite these challenges, March closed at $184b in new supply pushing 2025Q1 to $531b, making it the best performing Q1 over the last five years.

Issuer activity was primarily driven by refinancing needs, general corporate purposes, and M&A-related transactions. Two deals that headlined the month were M&A related, Mars Inc’s $26b 8-part debt offering and Synopsys’s $10b 6-part debt offering. New issue concessions, compression, attrition, and oversubscribed order books remain in line with 2024 data, although the market has experienced a slight increase in new order concessions in March. Corporates led issuance volume, with FIG activity having a moderate showing, and emerging markets seeing limited participation. Issuers favored the long end of the curve with 10-30y and 30y+ dominating issuance volume while the 5-7y continues to see an increase in activity. March’s issuance was driven heavily by the financial, non-cyclical, and utilities sector while other notable transactions were from the automotive industry and foreign banks who tapped the market in anticipation of an escalating trade war.

Option-adjusted spreads (OAS) elevated in the second half of March, closing at ~0.93, well below the five-year average of 1.14 but above the year-to-date average of 0.84. Year to date, March has seen noticeable higher OAS levels compared to what has been observed in prior months. The yield to worst closed at ~5.17, above the five-year average of 4.04 but below the year-to-date average of 5.27. The CDX Investment Grade index closed at a monthly high of ~61.8, below the five-year average of 64.38 but far above the year-to-date average of 50.94.

AmeriVet Securities remained active in the capital markets throughout the month as we Co-Managed five deals across eight tranches worth $6b of high-grade debt – Virginia Electric and Power co.’s $1.25b 2-part debt offering, Duke Energy Progress LLC’s $2.1b 3-part dept offering, Edison International’s $550m debt offering, MicroStrategy’s $850mm Perpetual Preferred Stock, and Citigroup’s $2.25b debt offering – continuing to add value with our focused outreach to our Tier II and Tier III professional retail investor base.

April Outlook

The new issue calendar for April is calling for $120b versus ~$102b that issued in April of 2024. If April’s new supply meets expectations, April 2025 will be the best performing April over the last five years. Looking ahead, the trajectory of the high-grade credit market will continue to be sensitive to the pace of inflation and issuers’ ability to navigate dynamic market conditions. Broadly speaking, the market will continue to monitor key economic data, Fed activity, the Trump administration’s evolving policy agenda, but will shift attention to major earnings reports and credit rating changes to monitor overall IG market health. The market is pricing in the likelihood of two to three rate cuts this year, likely to occur in the second half of 2025. April should resemble March in many ways in terms of a volatile issuance backdrop and market uncertainty. President Trump’s “liberation day” is rapidly approaching with post implementation market implications unknown. In the run up to April 2^nd, the market has likely priced in much of the effects of an escalating trade war but has room to run to the downside if geopolitical atmospherics continue to degrade.

We expect April issuers to navigate the difficult landscape and tap the market in herds. On the investor side, we expect to see continued strong demand and investors allocating towards investment grade bonds to pick up extra yield. Additionally, we may see more issuance around the 5-7y tenor in April and throughout 2025Q2. With a large amount of debt coming due in June and favorable rating trends, we anticipate April to meet expectations despite the market wide noise.

IG (ex-SSA) Metrics