Structured Thoughts: 2026 Year Ahead

Thank you, everyone, for joining us for the DB Securitized PodCept. The topic for today is our Deutsche Bank 2026 Securitization Outlook. My name is Ed Weird, and I'm joined here today by my team in Securitized Research.

We have Kayvon Daruyan on the ABS side, Bipol Sinha on CMBS, Jamie Flanick on CLOs, and Doug Runty on Transportation ABS. We've historically done an Outlook call, which lasts about an hour, so we're changing the presentation to a podcast to try to keep it lively. So rather than each individual sector go through the issuance and credit and concerns that they have about their sector, we're going to jump around.

So I want to start with one thing. So I've asked each of the analysts to think about the one thing that they would highlight to investors about their sector, and whether that's credit, underwriting, downside, opportunity, what people are or are not talking about, but to go through that one thing. So I'm going to start with Kayvon Daruyan to kick off with his one thing for ABS.

Sure. I would say that the one thing for ABS, the most important thing, is the health of the U.S. consumer. If the U.S. consumer is in good shape, they'll keep borrowing, keep spending, the economy will continue to grow, and they'll be well positioned to repay their debts.

Clearly, there are headwinds facing the consumer, like still high interest rates, persistent inflation, but overall, we think the consumer is still in pretty good shape. Unemployment is still low from a historical perspective. Household leverage is low, below pre-pandemic levels.

Net worth is up 50 percent, household net worth up 50 percent since 2019. Interest rates for consumer loans have started to come down, and banks are saying that they're more willing to lend to consumers over the last two quarters, according to Fed senior loan officer opinion data. And all this translates to the fact that the consumer is still spending.

So positive for ABS. Great, baby. Jump over to Jamie on the CLO side, the corporate side.

Yeah, thanks, Ed. And I would say that maybe the one thing is roughly adjacent to what Kayvon was just mentioning, and I would frame it as the health of the underlying leverage loan market for CLOs. You know, we obviously saw some pretty big blowups, too, with Tricolor and First Brands in September.

And ever since then, there's been this fog hanging over the lev-fin markets. Loans have sold off, really. The sell-off or the softening began, I would say, like, mid to late July, but really accelerated after those defaults in mid-September.

And loan prices now are sub-97, which is, you know, really closing in on year-to-date lows. So I think, you know, framing it as the one thing to look for in the year ahead, and to some degree what would form as the bedrock of the CLO, you know, some of the credit metrics, and maybe even trickle into deal activity next year, would be how strong, how viable is the underlying leverage loan market. Great.

CMBS has also had some idiosyncratic issues this year. Bipul, what's your one thing for CMBS? Yeah, sure, Ed.

The most important issue in CMBS is SASB defaults, which is leading to losses high up the capital structure, including AAAs. If you look at overall SASB losses, which are low in the range of 2% to 3%, but due to single asset risk, losses can climb quickly up the cap stack. On the other hand, Conduit expected losses are higher, about 5%, but due to diversified pool structure, no AAAs are expected to take write-downs.

So, SASB AAA taking losses is a black mark for CMBS. No other securitization sector has anything like this. Doug on transport?

The key theme in the aircraft ABS sector is that solid fundamentals should extend well into 2026, and likely beyond, which bodes well for strong performance of existing aircraft ABS transactions, and are likely the catalyst for near-record aircraft ABS issuance in 2025, and likely record aircraft ABS issuance in 2026, which we'll talk about in a little bit more detail later. Great. So, when I look back at this past year, we definitely had some idiosyncratic issues across all of these sectors.

So, the Palisades Center mall default with AAA losses, we had the Tricolor fraud issues, we had First Brands on the CLO side, but I'd say overall, the market took many of these things in stride. I think if I wanted to think about one thing from the macro side, what is important right now is private credit and how it's changing credit creation in the U.S. So, we talk about private credit potentially reaching $10-15 trillion over the next 5-10 years, and that is going to be taking market share away from banks.

I think securitization has a big role to play there, providing debt to private credit sponsors. But some of the concerns I'd suppose we would have with the private credit ecosystem right now is, if you look at some of the things that are happening, you have rapid growth, light regulation, a competitive lending landscape, and opaque valuation. So, we do think that means that there will be losses and mispricing.

So, I think that's especially true when you don't have a market clearing level for some of the debt that's traded. So, I think that would be my big thing from the macro side. So, next question is on relative value and thoughts on spread levels and direction, the rationale for your top pick.

So, I'm asking everyone to give us their top pick. And if I could just frame it again, some of the backdrop that we have for securitized is we've got very good bond inflows. So, we expect next year we're going to have something similar to what we're going to have this year in bond inflows.

That's $320 billion in annuities and $190 billion in bond funds. So, those are very strong inflows into the sector. Demographics also supportive of more fixed income demand.

And I think securitization fits really well into those fixed income inflows, partly because of where IG corporate bond spreads are. They're close to 25-year tights. So, a good fit for those inflows.

But maybe we'll go round robin. Doug, do you want to kick it off with your top pick for transportation ABS? You know, I think our top pick has got to be the sub tranches of many of the outstanding transactions, getting back to our fundamental aircraft market forecast of continued strength in 2026 and beyond.

We think the strength in the market is going to lead to accelerated sales out of existing aircraft ABS transactions, which should allow accelerated debt repayment going forward. Just highlighting briefly some of the fundamentals that I addressed earlier. Global air traffic, which is the driver of demand for aircraft, is well above pre-pandemic levels and is poised for further growth.

Airline profitability globally is stable to improving, aided by lower oil prices, which is reducing counterparty risk and improving collections for outstanding aircraft ABS transactions. Aircraft storage, which is inversely and broadly correlated with lease rates and values, is significantly down, so lease rates and values should be up. And supply of new aircraft is still limited.

All of that will lead to a continued strong market for aircraft for secondary market sales, which should allow for accelerated repayment of outstanding aircraft ABS deals and be a catalyst for new issuance going forward. Great. Jamie?

Yeah. Actually, if you don't mind, I might give two relative value picks just because I think they're both very attractive right now. The first would be BBBs in refides and resets.

We've seen them price wider by about 15 to 20 basis points over the last month or so. And I think that this continues into 2026 as we see a lot of additional repricing supply hit the market. And then I'd say the second has been junior AAAs and junior BBBs.

These are new issue deals oftentimes, but we're also seeing resets with these as well. At the AAA level, plus 20 basis points over the senior part of the stack, so the senior AAA. And then for BBBs, it's closer to 100 basis points.

So those would be the two real value picks that we have in CLS. Deepu, on CMBS? Yeah, sure.

So in CMBS, we expect modest widening of spreads, some softening of credit going into next year. We forecast Conduit AAA 15 bps wider to T plus 95 and SASB 75 bps wider to T plus 550. And at the risk of repeating myself, my top pick for CMBS is short duration senior AAAs.

If you look at the spread term curve, it is flat because market expects extension for maturing bonds. But in reality, senior AAAs almost always pay on time. And it was true even for CMBS 1.0.

So there is easy 35 bps pickup versus short duration single A corporates. Kevan? Sure.

Our top pick is subprime auto IG rated subs. We think investors should look for opportunities to buy on any weakness and the better names. We think comparisons of current performance to the GFC are overdone.

While subprime borrowers are under stress, the underwriting has improved since 2021, 2023 vintages. This is where when you look at the deals that are having a hard time away from tricolor, which we think is idiosyncratic, it's largely these vintages. And again, the deals that are having a rough time, the ones that look like they're going to take losses are well known to the market and have been for at least a year and a half.

We think that tax refund season should be stronger than normal for subprime borrowers next year, which I think will provide a boost to performance. Away from that, I'd also say, you know, as sort of a reach pick, we'd like timeshare subs. Timeshare ABS is a prime obligors and a long track record of strong sponsor support where they essentially buy out the defaulted loans.

If you have the view that this practice will continue, I think the spreads look very attractive. When you look at the subs, you know, they can range from the low 100 basis point area for single A's down to 300 to 400 basis points for double B's. Great.

Interesting to hear so many picks related to subordinate tranches in the securitized sector in the context of the okay-ish economic outlook, but been overall very resilient over time for a lot of those sectors. I think in RMBS, what I would highlight for the non-agency sector would be HELOCs and closed-end seconds. And this relates to the lock-in effect for mortgage borrowers.

So you have prime plus and super prime borrowers that have a very low first lien mortgage rate looking to tap liquidity in their homes. Triple A spreads here 140, 150 on the triple A's and low 200s on the triple B's. This is nothing like the sector was before the great financial crisis, but it does benefit from conservative rating agency assumptions that stem from the crisis.

So these are prime, super prime borrowers. I think spreads on triple A's can go 20 to 30 tighter in this sector and expect issuance to be pretty healthy. So if we go away from our top picks and think about an out-of-consensus view or something that people are not talking about, maybe we can highlight something there.

Bipul, do you want to start us off with something that you think is out of consensus for the CMBS sector? Sure. In conduit 2011 to 2015 vintages, the base case loss expectation is 5 percent, but there is a decent probability that losses might end up being higher, about 7 percent, especially in vintages 2014 and 2015, where there is a high distressed volume of retail and office loan still outstanding.

Kayvon? Sure. I'd say a topic that maybe is getting too much airtime, but I think is a distraction.

The New York Fed delinquency data and the Fitch subprime auto index data, for folks who are bearish in the sector, these two data sets get brought up constantly. And the claim is that, well, current conditions are approaching GFC levels of deterioration. We go into this in the report, but we think it's disingenuous to make that claim.

For instance, the New York Fed delinquency data includes defaulted loans. And so there are distortions in the overall levels. We compare it with 90 plus day delinquency data for securitized and show the differences in the report.

And even just eyeballing credit cards, the Fed delinquency rate is about 10 times higher than the securitized for 90 plus days. The Fitch subprime auto index, yes, the headline print for delinquencies is higher than GFC levels, but the overall collateral mix of that index has shifted greatly over time. It's not a headline number for overall subprime auto borrowers for the U.S.

It's what constitutes ABS outstandings at each given point of time. And we just have a lot more deep subprime now than we did back then. Also, I would say for the folks who are pointing to that, they should also point to the annualized net loss rates, which if you look at it over the last 10 years, current loss rates are well within their expectations at this point.

Doug, on transport? A macro and a micro thing that people aren't really talking about. I guess the first would be geopolitical risk, which is largely unpredictable.

The aviation sector has a very big beta to any sort of geopolitical issues, like we saw with the invasion of Russia, of Ukraine, as we saw with COVID. Other sectors get hit. Aviation gets hit really hard.

The other is much more esoteric, and maybe it's no longer out of consensus because we've been speaking about it for a long time. For all of the strength of the aircraft market, narrowbodies, new Y-bodies, there is an island of continued turmoil, and that's teenage Y-body aircraft. Great if you have them on lease.

The airline is likely going to want to renew it, but if it comes off lease, you've got a problem, a big problem, and it's one that aircraft ABS transactions aren't really set up to handle. Jimmy? Yeah, I would say one maybe differentiated or out of consensus call that we have is being quite constructive on equity.

I know that the focus of our first podcast a few months ago was looking at the residual tranches. In CLOs, it's really fallen out of love, particularly, as was mentioned a few minutes ago, with the level loan sector coming under this credit distress fog, particularly over the last two and a half or so months. I think this is actually an interesting way for a CLO investor to play a bit of spread widening heading into 2026, which is our call.

So that would be, I think, maybe an additional topic of ours, but also maybe a view that's out of consensus right now. Okay, some interesting things coming out of that. CMBS maybe understating the headlines, understating risks, ABS overstating risks, and also even teenage airplanes, I guess, are challenging in addition to teenage humans.

So let me highlight something from the macro side as well. So I think one of the things that, as I think about this whole sector, is we have a $3 trillion market across all of these different products. And what we're missing is a good securitized bond index.

And I think over time, more and more of our issuance and outstandings have fallen outside of any sort of bond index. So we're probably something like 10% to 15% in index product. I think a good index keeps people honest, and we need it to help transparency and benchmark performance.

I know that this is a holy grail, but it is going to be a big challenge, particularly if we see growth, like the private credit sector is talking about. On the resi side, I would just say I think there's upside in prepays, particularly in the non-QM market. We've got investor loans that are rolling out of their prepayment penalties.

I think private credit is going to lead to expanding underwriting conditions. So we'll see prepays kind of coming up off of their recent levels, both a combination of seasoning, but also credit curing to the GSEs or credit curing within the non-QM kind of universe. So let me go to issuance, and I'll give you the macro numbers for the securitized market, and then hand it right over to the analysts.

So $960 billion gross issuance for 2026 is our forecast, so close to a trillion. It's a big number, but net issuance only $273 billion. So similar to 2025, our numbers for this year we think will be similar, but a decent technical backdrop with that happening.

So maybe, Jamie, if you could start it off on the issuance side, because there's some interesting things happening on the CLOs. Sure. Definitely, Ed.

We are still penciling in for full year 2025 for the new issue market to end right around $205 billion, and we're still on track, roughly $183 to $185 billion as we're recording this podcast. We see this number contracting by about 5% to 10% next year, and we are framing it as $190 billion, all told. Part of the rationale behind this is that we feel that we're going to see continued late cycle signals percolating throughout 2026.

In particular, it wouldn't surprise me if there are two to three more headline attention grabbing defaults, which will further not necessarily turn people bearish on the market by any means, but still I think this would cause further compensation on the margins for investors to be investing into CLOs as well as love loans. So these late cycle dynamics is part of the rationale for this. An interesting thing, though, I think that we could see happen next year is that over the last two to three years, middle market or private credit CLOs has accounted for about 20% of total issuance versus the publicly syndicated or the BSL market, which has accounted for 80%.

We see some marginal shift in this next year where BSL would go closer to 75% and private credit to 25%. In CMBS, we are forecasting private label gross supply of $155 billion, of which $40 billion in Conduit, $85 billion in SASB, and $30 billion in CRE CLOs, broadly in line with this year with a slight pickup in Conduit as rates moderate going into next year. The CMBS market is undergoing structural shift in composition.

Most of the net supply is coming from SASB, whereas Conduit outstanding is declining. Moreover, 70% of the Conduit supply is of five-year deals. As a result, there are two implications.

First, the weight of CMBS in the bond aggregate index is declining. And second, the duration of CMBS index is shortening. Non-agency CMBS index duration is three and a half versus six for bond aggregate index.

Kayvon, you want to give us the ABS numbers? Sure. Yeah, we're forecasting record issuance next year.

So $345 billion across autos, student loans, credit cards, equipment, and esoteric. We think that's going to be a roughly 5% increase over where we finished this year in terms of net issuance. We're looking at $50 billion.

So just breaking it down quickly, we're forecasting $170 billion for autos, $12 billion for student loans, $18 billion for credit cards, $25 billion for equipment, and $120 billion for esoteric. Each one of those groups we think will be up year over year except for credit cards, just not as much maturing next year as there were this year. And we think the driver for the increase in issuance is digital infrastructure and specifically data center.

We expect to see $25 billion in data center ABS issuance next year. It's a near doubling of what we saw this year. Also within that esoteric number, we're forecasting $30 billion in consumer loan ABS issuance.

Great. Record ABS. And I think, Doug, are you also in the record category?

Yeah. Although, Ed, I must say my record numbers seem a little bit anticlimactic after hearing Kayvon's absolute numbers, but here goes. For 2025, aircraft ABS issuance is just under $9 billion.

And with some time remaining in the year, we could approach or exceed the record $9.6 billion of issuance in 2019. For 2026, based upon the strong fundamentals that we've discussed earlier, we think aircraft ABS will be at record levels ranging from $11 to $13 billion, with some upside from that if the aircraft ABS equity market reopens broadly. I should say that, in addition to aircraft ABS, we do expect the lessors to be busy in the corporate recourse market with $20 to $25 billion of recourse unsecured issuance, with upside potential there as well from acquisition financing.

So I'll clean up with RMBS issuance, where we're forecasting $220 billion of gross and net of $115 billion. So I think a couple of things that I would highlight there is that non-agency RMBS would represent the single largest source of net supply for the securitized market. So we're at $270 billion net across all the sectors, and RMBS would represent 115 of that.

So what I'd also highlight with RMBS is, over the past five years, mortgage credit outstandings have grown by $3 trillion, and home values have grown by $20 trillion. So there's a very significant mismatch in terms of what the homes are worth versus how much credit has been put against them. So this is the opportunity for HELOCs and closed-end seconds.

Together, across those two, we're forecasting $35 billion. I'm surprised it's not growing faster. We expect to get $27 billion in 2025, but that's probably the biggest growth sector in terms of percentage for RMBS.

Maybe then moving on to the next big topic, which is for us and always is credit, and highlight maybe some risks that you're monitoring, warning signs, downgrade risks, underwriting conditions, different things happening in your market. And let me just give a quick intro of the economic backdrop from Matt Luzzetti and his team here at Deutsche Bank, which is we're forecasting low 2% real GDP growth over the next couple of years, unemployment 4.3% today, expected to stay below 4.5%, the low-hiring, low-firing environment that has existed. One Fed cut right now, but could be more depending on changing leadership at the Fed, maybe slightly more dovish.

And then on corporates, I think we're running at around 4.5% on speculative grade and 3% in leveraged loans so far this year. Maybe I'll just kick it right to Jamie with that kind of backdrop with what your forecast is for credit and things to watch. Yeah, definitely.

Thanks, Ed. Like you said, level loans. Level loans within CLOs, we're tracking around 3%.

I think the broader index is closer to 4.25. Certainly elevated, but we see it as being well-contained, the first brands episode aside. I do think, and I was just talking about this in relation to the new issuance, I do think some of these late cycle pressures do feed in a bit next year into level loan prices, into issuance.

So that's something that we're definitely going to be watching in 2026 and of course, how that impacts the default rate. We still see it as being contained within the low threes and we have 2026 ending basically where we are right now at 3%. One thing to highlight though, I think is in kind of maybe metaphor I've been playing around with is hearing a lot about the K-shaped economy and how that's been applied to the consumer market.

I've kind of seen this framing, if you will, and applying it more and more to the corporate credit market as well. There's a pretty large cohort of loans within CLOs right now, roughly 9.5% that are priced below 90. Below 90 is a bit of a line of demarcation in the sense that these are becoming troubled credits and if they slip past 80 points, more than likely they would have a rating downgrade associated with it.

So I think this cohort, this 9.5%, this is maybe the low tail of the K-shaped economy, if you will, if you apply it to corporate credit and that's also something that we're going to be watching in 2026. Well, on the topic of K-shaped, maybe we'll just kick it over to Kayvon to talk about the consumer side. Sure.

Traditionally, the primary driver of losses in consumer ABS is unemployment and in the mid 4% area range, that doesn't give us great concern for next year. So overall, we think collateral performance will be stable. There are a couple areas of weakness though, subprime auto and private student loans, both things to keep an eye on.

We are encouraged though by what we think is going to be a very strong tax refund season, and I think I alluded to this when we were talking about subprime auto, subs is a relative value pick. The one big beautiful act provisions affecting income taxes, like the senior tax credit, the exemption of taxes on tips and overtime, these are made retroactive to January 1st of 2025, but the IRS didn't update their tax withholding tables. So they weren't applied this year.

That means that I think a lot of folks who are paying their taxes probably overpaid relative to where the tax rates actually were for this year. So we think that's going to lead to outsized refunds. If you look at auto ABS performance data historically, tax refunds are always meaningful with respect to the improvement that you see sequentially, and we think it's going to be outsized this year.

Doug, is there a K in the aircraft sector? Yeah, I guess when I look back at my notes, there's a lot of positivity in the sector, which of course as a fixed income analyst makes me very nervous. So as we look at potential risks, things that we should be looking out for, looking the wrong way down a one-way street, we talked about airline profitability, and it is an aggregate looking very good for 2025 and into 2026, but that aggregate number masks the fact that profitability is highly concentrated in the U.S. and to some degree Europe and the Middle East.

There are more than 300 airlines operating in the world. The average credit quality of airlines globally is B-plus on a good day, B-minus on a bad day. So we do have to keep an eye on the airline counterparties and all of these aircraft ABS deals.

Sustainability, it's something that hasn't popped up on this podcast, so I'll raise it. It's certainly diminished in the U.S., but it has not yet gone away in Europe. So taxes either directly on airlines as a sort of syntax or taxes indirectly on fuel, which makes up about a third or at least a quarter of an airline's expenses, is also something to keep an eye on.

Lastly, a macro issue that we're keeping an eye on is inflation of maintenance costs. It's a little bit geeky, very idiosyncratic, but where inflation has gone down globally in just about every sector to 2 to 3 percent, aircraft maintenance costs are up in the high single digits to the teens, and it doesn't look like that's stopping. That poses big issues for the industry.

It's not sustainable. At some time, there's going to be a point of reckoning. I don't know when it is, but we are keeping an eye on it, and we'll be riding on it through the course of 2026.

Great. Abul, on commercial real estate, maybe a slightly different take on credit outlook? Yeah.

So in CMBS, we are watching a few things closely. First is SASB defaults. That's what we discussed in the beginning of our conversation.

Two AAAs have already taken losses, and there are more than a dozen of originally rated AAAs are expected to take losses in SASB. Second is refi success rate. On time, payoff rate for Conduit is 74 percent, and for SASB, it is about 70 percent.

As of now, maturing loans face 200 bps higher cost of capital versus original coupon. We expect these numbers of refi success rate to improve next year if rates decline. And the third thing that we are watching is that there are multiple entrants entering CRE securitization space, which will lead to lending competition, which might weaken new issue underwriting.

Yeah. These are my three picks for credit. Great.

Look, I think, you know, as Doug mentioned, we're all credit analysts, so we tend to see the cup as half empty. It's kind of the mindset for securitized analyst or credit. But what I'm hearing is not that unhealthy an outlook.

We're highlighting risks, but Doug, Jamie, and Kayvon all recommended triple Bs from their sector, so they recommended subs. Kayvon is talking about a reasonably healthy consumer, especially on the upper side of the K. Jamie's saying defaults will be similar to this year.

There's a portion of the lower side of the K that he's watching closely that's sub 90. But I just, you know, just to summarize, we all focus on credit risks, but the recommendations are saying that this is still a reasonably supportive market, nothing kind of impending, except for perhaps the commercial real estate market, which is pretty well flagged. But certainly I think some of the things that Bipple's highlighting are relevant for underwriting for new issue as well as some of those legacy deals.

On RBS, I just highlight we're watching early delinquency measures of student loan delinquencies. Now I need to see the non-QM sector is really a high FICO product, so we don't have that much exposure to the lower quintile for sure, but even the lower kind of 40% of borrowers, this is like a mid 700 FICO product now. Non-QM sector is $150 billion outstanding.

If you look at Alt-A, which is a product from pre-GFC, that was over a trillion. So this is a very tiny, very tightly kind of underwritten market for now on the non-QM side, and there's nothing we think that is really going to be disruptive overall for delinquencies and non-QM. So we're coming up on, I guess, a little over 30 minutes now.

A little over 30 minutes now, 35 minutes. Maybe we'll just do one more second theme, since we are all research nerds here in the room. And if there's another theme from your sector that we didn't capture in the one big theme or something that you would want it to highlight as a closing comment, we'll kick it around.

Maybe, Kayvon, why don't we start with you? Sure. Sure.

I'd say what I expect to get questions on once folks have had a chance to read through the outlook is why only $25 billion in new issuance for data center? You had Project Beignet, I think, came in at $27 billion. And so a little bit of a nuanced answer, but it takes time for data centers to be securitized.

This isn't project finance. For these things to be included as collateral in the master trust, they need to be stabilized. So built out, leased up.

This could take 18 months to three years from when construction starts. So there's a little bit of a lag there. That said, it may be a little bit on the conservative side.

We'll have to see. Yeah. In CMS, it is a tale of two markets.

On one side, we have record new issue supply. And on another side, we have record distressed levels in legacy pre-pandemic deals. That's the second thing for CMS.

I would say in CLOs, the 2026 outlook, obviously, is a one-year time horizon. But I think there are two themes that are interesting from a slightly longer time horizon, maybe, say, two to three-year time horizon from now. I think the CLO ETF market, one large question I have is when will it shift from a winner-takes-most market to one that's a little bit more evenly distributed when it comes to inflows.

Right now, the largest fund is still roughly 70% of the U.S. market. I think that potentially changes over time, though, however. And a couple of things would drive this.

First is just we're seeing a bit more dispersion when it comes to returns for these funds. And then secondly, we're actually seeing some pretty nice differentiation when it comes to portfolio construction to these funds as well. Some of the newer funds have a really interesting structure where they're just focusing on AAs to, I believe, maybe targeting some BBs as well.

So really kind of forsaking, in a sense, the AAA market. We might see more of these more novel portfolio construction strategies moving forward. And I think that could shift this market, again, a little bit more evenly distributed than it currently is.

Doug, on the aircraft ABS side, a second theme? Yeah, I think the ultimate question is when do the aircraft manufacturers catch up in production and ultimately start to overproduce, which has been the case in the past in cyclicality. So I think for us, we've been a huge beneficiary, or at least I should say less sores, in aircraft ABS transactions that are long residual value have been an enormous beneficiary of this mismatch of growing air travel post-COVID versus diminishing manufacturing capability.

So manufacturers pulled down manufacturing during COVID. It's been very difficult to turn the dial back up. But at some point, things will start clicking.

They'll start to produce, and then they'll start to overproduce. We don't see that for the next three to four years, perhaps even longer. Demand is substantially exceeding supply.

But if history provides us with a lesson, it's that manufacturers at some point will start to overproduce. And then maybe just to finish up, I guess, another theme from the macro side and for RMBS. On the macro side, I would say in 2026, the NAIC, which is the insurance regulator, will be allowed to potentially challenge private credit ratings.

And they're looking to, in our view, we think that that new power is likely to target new sectors rather than some of the established food groups of ABS, CNBS, CLOs, and RMBS within securitization. But it is a change. We think that they may use that in 2026.

And it's something to keep an eye on, particularly in the context of private credit growing and captive insurance and the growth in the private credit market. On the RMBS side, obviously, well, the second biggest theme that we're highlighting is GSE privatization. So there are real challenges in getting this done.

If you're looking for evidence of that, you've got 17 years of us talking about GSE privatization. So to kind of borrow something from Doug's market, it's kind of like changing the engine out of an airplane while it's moving. It's very difficult to do this, and it's taking a lot longer than people expect.

So I think if I just said, what if it does get done, okay, and just accept it as happening, which is not our base case at all, I think it would be setting some clear boundaries for the GSEs in terms of what they are allowed to originate so that they don't steal market share from the non-agency market, which is functioning very well. Or you have adverse selection where the non-agency market is left with everything that the GSEs view as a bad risk profile once they're privatized. So, look, I think that's about 40 minutes or so that we've presented to you.

The piece we published came out on Tuesday morning. The headline of the piece was Securitize, Starring Role in a Changing Credit Ecosystem. So it's got more details in it than we've gone through here in terms of issuance, credit risks, the different components of the different sectors.

So there's a lot in there. We'd love to connect with anyone that is looking for data, looking for feedback. I know that many investors spend this time of year creating their own outlook and thinking about how to allocate their Securitize portfolio going into 2026.

So we'd love to connect there and appreciate all the partnership all year long. So thank you, everyone, for listening and for the partnership with the DB Securitize research team. This podcast has been produced by Deutsche Bank and may contain research as defined in Method 2.

The information discussed is believed to be reliable and has been obtained from public sources believed to be reliable, although Deutsche Bank makes no representation as to its accuracy or completeness. Opinions, estimates and projections discussed constitute the current judgment of the speaker at the time of recording. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice.