Structured Thoughts: US Securitized Markets Midyear Outlook

Good afternoon, everyone. My name is Ed Reardon. I head up the Securitize Research team at Deutsche Bank.

Today we're doing a DB PodCept structured thoughts on our mid-year review. So we published our mid-year just this morning, and we wanted to go over some of the key themes in it. So I'm joined here today by the team, Kayvon Daruyan on ABS, Bipol Sinha on CMBS, Jamie Flanick on CLOs, and Doug Grunty on aircraft ABS.

And I'm going to just kick it off with kind of an overview of DB's perspective on the economy, which is the word that they use is resilient. So they are forecasting low 2% growth and point to an economy that's weathered tariffs, inflation, higher interest rates, the Iran war, higher oil prices, and a 6.6% budget deficit. So we are riding the AI investment boom, which we'll touch on here, and a couple of other numbers that I would just point out before we get into it.

One is unemployment. We expect that to remain low at 4.3% through next year. And then in terms of rates, Fed on hold for the foreseeable future.

And the 10-year forecast is at 4.7% to end this year. So that's the kind of backdrop, the key word is resilient. And I think that is a word we'd also use to describe issuance.

So we're going to kick it off with issuance, and maybe we'll start with Kayvon to go over his issuance forecast for the year and any noteworthy trends there. Sure. So we increased our full year forecast to $360 billion on the strength of just a substantial increase in issuance seen year to date.

Our largest ABS subsector, which is auto ABS, is essentially flat year over year, which generally wouldn't point to growth in overall supply. Credit card, student loan, equipment ABS are coming in line with our forecast. So really the year over year growth in overall issuance has been driven by esoteric ABS, which is sort of a catchall category for anything that doesn't fit neatly into the others.

We've seen very strong supply in data center fiber aircraft, whole business, unsecured consumer loans this year, which is really driving that increase. Just do a round robin here. Bepo, CMBS?

In CMBS, we are calling for $160 billion for the full year. We are keeping our projection roughly flat what we had projected in the beginning of this year. Year to date issuance is about $86 billion, which is up 20% year over year.

Post-COVID structural shift continue to be in place. CMBS is increasingly becoming a SASB market. More than half of CMBS issuance volume is coming from SASB.

Conduit is shrinking, smaller deals, shorter tenor, now predominantly a five-year paper. Conduit accounts for just 15% of the issuance. Conduit still has more outstanding than SASB as of today, but SASB should be able to overtake conduit volume by year end.

Lastly, CRE CLOs. Issuance is strong on a gross basis, but net supply has been roughly flat over the last 12 months. That's it.

In CLOs, we are currently tracking at $75 billion year to date. We think we will probably reach $80 billion by the mid-year point. Our full year forecast is at $190 billion, which obviously sounds a bit rich from where we are at current levels, with $110 billion to catch up in H2.

We think we can get there just because of some of the headwinds that you mentioned at the top with the Iranian war. I think a unique feature of CLOs as well is just the blowback related to software and the underlying credit concerns that that brought with it. We think that these headwinds that made both pricing and therefore issuance a little bit choppy in H1 will dissipate into H2.

Also, when looking at H2 of last year, the monthly average was $18 billion, which is roughly what we need to get to our $190 billion target by the end of this year. We think with some tailwinds coming down the pike for us over the next month or two, we think it's doable. In aviation, we are well on the way for a record year of issuance for lessor aircraft ABS and probably the second best year in a decade for lessor debt overall, including corporate recourse debt.

Aircraft ABS issuance year to date is approximately $8 billion. Our previous forecast that we put out last November was for $11 to $13 billion of issuance of aircraft ABS in 2026. Our new forecast is for $15 to $17 billion of aircraft ABS issuance and total aircraft lessor issuance, including recourse corporate debt of $32 to $36 billion.

It'll be a mix of regular issuers that we've seen in the past as well as new names we expect. And let me just round it out on the non-agency RMBS side. Our forecast is $215 billion gross, $80 billion net.

So far, it's been really fueled by non-QM issuance, but where we do see growth potential is in HELOCs and closed-end seconds. And just the overall numbers that we're looking at here across all of these products is the trillion dollars gross issuance and net issuance of just $270 billion. So that will come into play in just a second when we talk about some of the macro themes for the different sectors.

But maybe I could just ask everyone to highlight the one trend that they think is most important for their sector, and, Jamie, why don't you kick us off on that particular issue? Yeah, I would say the one, and this is actually more of a macro theme than anything, but the one thing that seems to really be buoying this yellow market, well, maybe multiple things coming into H2, but one thing in particular that we saw in H1 is just simply the repricing of the yield curve. Coming into the year, I think the market was forecasting, or most forecasters were forecasting, about two 25 basis point rate cuts.

That subsequently got repriced, I believe sometime in mid-March, to being on hold, if not now showing the probability, 60% or so probability of a rate hike by the FOMC's final December meeting. All this has been accretive really to two things in the CLO market. On the one hand, in the secondary market, volatility is great when it comes to relative value trading for CLO managers, and therefore the secondary trace levels that we've seen this year is up 35% year over year.

The second thing in which this has been accretive to the CLO market has been CLO ETF inflows. CLO investors oftentimes are more yield buyers than total return buyers. Because of this, we've seen upwards of $9.5 billion coming into U.S.

CLO ETFs this year. We think this trend holds into H2 as well, but I would say that probably that macro driver has been one of the most positive tailwinds that we've seen so far in the year. Doug, how about on the aircraft ABS side?

What's the most critical issue or trend to highlight? I think I'll take a word that you used a couple of times earlier, resilience. The sector has been remarkably resilient, even with the headwinds of the Iran war and the resulting rise in fuel prices beginning in March.

Issuance has continued after the start of the conflict, and spreads have actually tightened. Now with the situation potentially resolving in the Middle East and fuel prices potentially sharply lower and moving down as we speak, aircraft ABS fundamentals look poised to get even better. So a strong aircraft market, airline profitability up, issuance seems poised again for record issuance levels.

Bipul, how about from your side on CMBS? We've seen resilient issuance as you mentioned, but anything that you would highlight on the CMBS side? Yeah.

So this trend we have flagged in our piece. Commercial services have shifted from extend and pretend to actively cleaning the distress backlog and this shift is driving both liquidation volume and loss severities higher. About 1.8 billion loan volume has been liquidated year to date, and analyzed pace running 60% above 2025 liquidation volume.

This accounts for more than half of this liquidation volume, but what is important to note is severities. Losses are coming in around 65%, well above 45% to 50% range that we saw in the prior cycle. Kayvon, how about on the ABS side?

Well, Doug stole my answer, but I would again highlight the resilience. When you look at probably the biggest theme in ABS this year, it's been the strength in the new issue market. When you consider the Iran war blowing out spreads, causing market disruptions, to be in a position now where we're up year over year versus what was a record year last year and spreads have come back in and retraced their widening for the most part.

It just really points to a very resilient ABS market with just a diverse array of asset types that are backing the bonds. So let me wrap it up on the macro side for the one trend, which is demand surge. So the title for the mid-year piece was actually demand surge pricing, and that is coming from all of the inflows.

You know, Jamie just mentioned the inflows coming into CLOs by ETFs. We're also seeing inflows into the credit sector by annuity sales, which is insurance selling annuities and needing to put that money into higher yielding credit, and then also into the credit funds, mutual funds, and ETFs that buy credit. So the total projected inflows into credit are 500 billion.

We think a lot of that is being driven by baby boomers and demographics, them needing to buy more fixed income. But that is really a defining characteristic in my mind of the current securitization market and the demand for bonds. With that, maybe we can move to credit and – or actually, no, let's stop for a second.

I think probably you couldn't have a podcast today without mentioning AI. So if there's something to talk about in AI and technology for your sector, we'll go over that now, and we'll start with Kayvon just because data center issuance has been so strong and it's been such a hot topic. Right.

Again, one of the maybe top three topics in the ABS universe this year is data center. It's seen substantial growth year over year and is contributing to, again, to the overall increase in supply, but it's actually coming in behind our forecasted pace for the year, which might be a little surprising. So it's important to keep in mind that when you look at the amounts of CapEx that the hyperscalers are expected to spend this year, upwards of 700, 800 billion, the stuff that's being securitized are facilities that are stabilized.

So fully constructed, energized, leased. So it takes time for the supply to become securitizable. Again, when you look at the stuff in the headlines, the mega-sized AI training facilities, these really haven't been included in collateral for securitizations at this point.

So it's just important to sort of keep that in mind. We do think that the pace picks up a little bit. We think we hit our base case forecast for data center ABS, which is 25 billion, and CMBS, which is 15 billion by the end of the year.

So maybe just staying on the topic of AI then in terms of office demand from AI tenants, Vipul, do you have any perspective for the tenant demand from AI companies? In near term, AI is a net positive for office leasing, but in long term, it may be a threat to office demand. According to CBRE, since 2019, AI companies have leased roughly 21 million square feet of space just in Bay Area and about 10 million in Manhattan, Boston, and Seattle.

In longer term, the fear is that AI may slow down entry-level white-collar jobs. As per the data, overall unemployment rate is still low, but unemployment rates are up most for recent college graduates. It is difficult to predict the future, but in my view, the effect on office demand will likely be gradual, slower tenant headcount growth, less need for expansion, and weaker long-term absorption.

Okay, so some positives from Kayvon, some positive on the leasing front for AI users, and then I know software has been a big topic for CLOs, and they are probably on the other side of the AI equation. So Jamie, anything on that side of things to highlight? Definitely.

Let me try and keep it positive, or maybe balanced, I should say. On the surface, yeah, software has been a problem sector, if you will, for CLOs. CLOs typically, your average CLO has 11 or 12-ish percent of exposure to the sector.

If you roll in business services, which oftentimes are tech or software-related companies as well, you get up to closer to 20 percent. So definitely any sort of impact when it comes to credit or to pricing through that sector really impacts CLOs quite substantially. And this year, at the end of January, heading into February, we saw AI disruption fears really take hold of investor sentiment.

Early into the year, software loans were pricing on average around $95, $96. By the end of February, kind of at the height of the software scare, they were pricing below $80, which is considered to be distressed territory. So a complete reversal for the sector.

What's been, I think, really interesting, and this is hopefully where the balance tone comes in, is that if you look at the number of loans within CLOs that saw a price rise from the period of beginning of the year, so January, to when the peak of the sell-off was happening, so call it first or second week of March, only 7 percent of software index loans in CLOs saw a price gain. So more or less the entire sector sold off in CLOs. If you fast forward, though, and look at that midway point in March to today, roughly 48 percent have seen a price gain.

So we've seen, I think, investors by this point digesting the headlines and coming up with a workable thesis as to where the possible winners, who the possible winners and losers may be moving forward, and really see the investor sentiment coming into a better balance after what was a pretty bleak couple of months for it. All right. Incredibly, there is even an aircraft ABS angle to the AI boom.

So Doug, go ahead and give us your perspective on AI and aircraft. Well, I can't really say that aviation is AI adjacent, perhaps, though it is a few degrees of separation away. There is one company in the aviation field that has talked about using older jet engines for data center power.

That company's stock rose tremendously after the announcement, although other lessors have not yet picked up on the concept, at least not publicly. The idea of turning jet engines into power plants does, in fact, make sense. Many gas-fired power plants today are based on a jet engine that is used to power the Boeing 767, for example.

But these so-called aero-derivative power plants require a lot more equipment to turn a jet engine, which produces thrust, after all, into a power source that produces electrons. So I guess, in summary, the concept makes sense. It's going to require a lot more work.

And I think it will be some time before we see it actually have a material effect on the economics of aircraft and engine leasing more broadly. It's all about the power for the data centers. All right.

So let's switch over now to credit. This is kind of what we spend most of our time on here in the Securitized Research Group. So I'm going to ask Keivan to give us kind of his update on the state of the consumer, and then I'm going to ask each individual analyst to highlight what their biggest credit concern is for their sector.

And I'll kind of loop in a rate, if there's anything that's relevant on the rates here, to mention it as well. But Keivan, give us the state of the consumer, and then I'm going to pass it around for biggest concerns for each credit sector. Sure.

If we were giving letter grades to the state of the U.S. consumer, we'd call it a B at present. So down slightly from a B plus when we published our 2026 year ahead outlook last year, breaking that down at prime and subprime, I'd say prime is an A minus, B plus. Subprime is a C.

You know, on the positive side, the unemployment rates actually decreased. The economy continues to grow. So again, very positive things, unemployment, you know, job loss is the primary driver for losses historically in consumer ABS pools.

In terms of headwinds, you know, consumer delinquencies point to some weakness at the lower end of the income credit spectrum. Inflation is on the rise again. You know, food and gas prices are straining household budgets.

Consumers are saving less. The personal savings rate is down, and real wage growth is currently negative. You know, looking at other indicators, consumer sentiment, consumer confidence are low, although that's probably related to how high gas prices are because there is a correlation there.

So even with, you know, with a solid labor market, you know, the rising inflation means that rate cuts are not in the forecast, you know, not really going to see rate relief anytime soon. So, you know, on balance, I'd say that, you know, the headwinds are, you know, putting the U.S. consumer in a slightly weaker state than they were, you know, near the end of last year. And your biggest concern for the consumer would be the subprime rating as a C?

Yeah. You know, there's, you know, I go to industry conferences and listen to lenders, and the common theme is that, you know, the narrative of the K-shaped economy is real, and there's increasing weakness in, you know, the consumers at the lower end of the credit spectrum. So, you know, to some extent, this is always an issue, but, you know, the rise in gas prices, I think, has had some meaningful impact on subprime model performance this year.

We didn't see the sort of improvement or, you know, sort of closing the gap in terms of year-over-year performance in subprime model that we had expected, given how strong expectations were for this year's tax refund season, and I think, you know, high gas prices are one of the culprits there. I am concerned, you know, looking forward, you know, to see if there's any spillover into the prime segment. Again, these folks generally are in good shape.

You know, if you own a home, you own financial assets, you know, you've seen substantial appreciation, which is supporting your spending. So Doug, can I kick it over to you, because obviously the consumer is reflected in demand for flying miles. So maybe give us some perspective on the consumer from your side, and then also what you think is the biggest credit concern for your sector.

Sure. Thanks. Most airlines make money from people sitting in the front of the plane.

Call it the top two to three deciles of the income brackets, and these people are doing quite well, aided by the wealth effect, unemployment low, income rising, real estate prices, as Kayvon mentioned, going up. This tremendous wealth effect has really created a lot more price inelasticity for airplane seats than people might have expected just a few years ago. Airlines though, with a more demand stimulus model, particularly in developing countries where passengers are literally moving from buses and trains to planes, as their income and consumer confidence rise, do face more challenges.

And I guess that's my biggest concern. The large established airlines, which are the largest users of airplanes, are in fact in many cases doing well because their consumers are doing well. However, the demand stimulus model, where a lot of the growth in aircraft demand is, could be facing more challenges.

A $5 fare rise for people in the front of a Delta cabin might not matter very much. A $5 or $10 price rise in ticket prices in developing Asia can make a big difference in underlying demand. So when I think about the resilience theme in terms of credit, I oftentimes think of CNBS maybe finding it a little bit more challenging to fit that description, given some of the downgrades and some of the challenges in office.

But Bipul, what is your biggest credit concern for the CNBS sector? The biggest credit concern in CNBS is the magnitude of realized losses that we are seeing in distressed assets. Over the past several years, services were extending and modifying these loans in the anticipation of recovery when the rates will come down.

This created a massive backlog of loans in special. Budget special servicing rate is at 11.5% and office special servicing rate is at 20%. So now specials are prioritizing to clear this backlog.

As I mentioned earlier, losses are coming in around 65%, well above 45 to 50% range we saw during GFC. I would say that bill is coming due for extend and pretend. And Jamie, you talked a little bit about software on the CLO side.

Is that your biggest credit concern or what would you list on the CLO side? Yes, I see, Ed, that is our biggest credit concern. It's just the number of maturities that are coming up in 2028 that may find it difficult to refinance.

Roughly 25% of the loans in the sector outstanding are maturing at that date. There has been some refinancing of that underlying collateral pool, but I think for some of the troubled borrowers as we head deeper into this year and particularly into 2027, they're going to be some, I think, some major headwinds for a few of them. I would say a second, just to kind of lump in here, I had mentioned that software was trading below 90 and that would be like the rating equivalent of being put on a credit watch for the sector.

But there's an increasingly large tail end of the loan pool that is now trading below 80. So if trading below 90 means credit watch, trading below 80 means more likely a rating downgrade. We're now at around 7%, at this time last year it was around 3.2%.

And what tends to happen when that tail of the market expands, like we're seeing right now, is that the default rate picks up typically six to eight months later. So we're currently, in terms of defaults from a trailing 12-month rate, we're currently sitting around 3% in the loan market. And I would not be surprised if that takes up closer to 4% by the end of the year.

And let me just round it out with the non-agency RMBS comment. I think one of the things that's happening in the non-agency sector is we've got very intense competition for loans, which oftentimes will lead to stretched underwriting. This is when I think the credit part of a securitized analyst job can be the most difficult, is when you've got a market that's kind of awash with cash, very intense competition on the lending side, and they're introducing new products or new parameters that are slowly and gradually kind of stretching that underwriting box, and that's when oftentimes you see mistakes if there's ever a hiccup on the economy or just underwriting mistakes, I would say.

So I would say intense competition would be my biggest credit concern on the non-agency side. So I think with that, we'll move into relative value and where we see opportunities in securitized. We always want to talk about credit.

That's kind of what we spend most of our time doing. So we can always find something that we're concerned about. But when I looked at spread forecasts for the underlying sectors, they were mostly wider, but not by much.

I would say like a couple of basis points wider across the securitized sector in terms of our forecast. So if I could just give a little bit of perspective for where spreads are away from securitized is investment-grade corporates are today around 74 bps. High-yield corporates are 284 bps.

Both of those are within spitting distance of 25-year lows. So if you think about securitized and how it fits into the broader credit market, there are still lots of opportunities. So let me just go start going around with the best opportunity in your sector.

What's the spreads? Why do you like it? Maybe, Bipo, why don't we start with you?

Yes. So I prefer SASB-MS over Conduit. With SASB, you get transparent collateral and sponsor selection.

And if you are comfortable with asset, you can move down the stack and pick up higher yield. SASB single A pricing at SOFR 240 bps, you'll have all-in yields higher than Corporate BB. Conduit USP has been diversification, but with smaller deals and fewer loans, that benefit has diminished.

A couple of large loan defaults can quickly push losses higher up the cap stack. Kevan, on the ABS side, lots of different sectors to choose from. So I have a couple here.

On the short, plain vanilla side, I like Prime Auto ABS Seniors and Equipment Seniors. I'd say the three years in particular look wide to bank cards and could actually see a little bit of tightening relative to bank card. Away from that, I like rental car IG subs.

I think single A's, unlike some other ABS asset types, haven't really retraced widening that we've seen here to date. I like the fundamentals there, a very stably used car market at present. And again, I like the spread pickup to other Auto ABS subsectors.

In sort of the AAA space away from the plain vanillas, I like Private Student Loan Seniors. You can get 100 basis points of spread and call it a three-year weighted average life, which I think looks attractive. And then just versus Corporates, I'd say Data Center Hyperscale Seniors, I'd say the top tier stuff is about 160 basis points over for a five-year single A hyperscaler.

Like the carry there and the spread pickup to Corporates. Doug, on your side. Well, at this present, the aircraft ABS sector are relatively tight for senior tranches in particular looking at historic precedent.

Senior tranches on the secondary and primary are plus 150 to 160. So we believe that opportunities in the sector are more idiosyncratic across the space rather than broad based. We do think there's some interesting opportunities that can be found in sub tranches of early vintage deals that are trading at a discount dollar price and are well positioned for repayment at par from aircraft sales where the market for aircraft sales is still extremely strong.

We believe that senior tranche debt offers fair value and prefer current generation seniors relative to the mezzanine tranches due to post-COVID changes and cash flow waterfalls that favor the seniors and more recent deals in a downside scenario. Jamie, just looking at your spread forecast, I have it roughly two wider to 126 on the AAAs and 10 wider to 295 on BBBs. That was one of the more benign forecasts.

What do you like in terms of CLOs? I think probably what undergirds that spread forecast is that, again, we do see a pickup in new issuance occurring in H2. So we do think that there's going to be, in order for that to happen, that there's going to be spreads trading within a relatively tight range.

I think the flip side of that has been that there still have been a number of repricings this year, even though the new issue has pulled back. Repricings look cheap to us right now, particularly for refis, single As, and BBBs and resets. They're both trading about 20 basis points wider than their comps in the new issue.

So that looks attractive to us. I would say a second two is just private credit CLOs. We do see a large negative sentiment at the beginning part of the year around software, maybe equally large stemming from last year and still trickling over into BDCs this year as well when it comes to private credit concerns.

Because of that, private credit CLOs have also traded off quite a bit this year. AAAs right now are offering upwards of 30 basis points on average versus their BSL counterparts. AAAs at 40 and then going even further down the stack, single As at 60 basis points.

So those would be the two relative value picks for us, repricings as well as private credit CLOs. All right. If I could again round it out on the non-agency RMBS side, we like AAAs.

We actually think that AAA spreads can go tighter from their current levels of T plus 115, call it 5 to 10 tighter. We think that there's nice carry there for a short duration bond together with a little bit of roll down. And then we also do like BBs for deleveraging.

So when we looked at bonds, it's right around 18 months from prepays that you get to a loss adjusted subordination that would typically justify an upgrade to BBB. So we do like BBs in the mid 200s to high 200s for the non-QM sector. So I guess one of the themes from our forecast is maybe slightly wider, but the carry will be attractive versus IG corporates.

So this is a difficult message in my experience for a securitized credit analyst when it doesn't matter what your bugaboo credit issues are. They all kind of get washed out when demand is as strong as it is today. So you typically see credit curves flatten, a lower amount of pickup from your off the run issuers or your esoteric sectors.

It's a challenging market for credit analysts, for investors as well when they're cut back on allocations. So it doesn't mean that we disregard credit. We still try to pick our spots, but I think we've all outlined a couple that we find cheap.

Is there anything that anyone would highlight on the sectors they feel like are a little rich or they wouldn't participate as aggressively right now? Kayvon? Sure.

I'd say for plain vanilla AAAs, credit card, ABS looks a little bit rich. I'd rather own prime auto seniors. Away from that, I'd say timeshare AAA seniors in the low mid 70s look a little rich right now.

I'd rather own private student loans at 100 over. In CMBS, I would say Conduit BBB. It looks cheap, but it is actually rich.

If you look at the new issue pricing, it is at roughly 410 bps, which seems attractive versus corporates. But if you look at historical data, more than half of BBBs have been downgraded. As I mentioned, it only takes one or two large loan defaults when the losses can go up higher up the stack.

So, the risk reward isn't as attractive what it seems. I would say if you ever want a little uplift to feel about your sector, you can always talk to the CMBS analysts on your team to feel a little bit better about your Securitize sector. Look, I think in RMBS, we think that single family rentals are a little bit tight.

The structure there has changed. It's become a little bit more highly levered and they've used a couple of structural tweaks to help the deals work. We just find better value elsewhere.

With that, we're at about 35 minutes in, so we'll do a lightning round. Maybe either the biggest potential surprise for your sector, what people aren't talking about that they should be, what people are spending too much time talking about that they shouldn't. Let me just give a lightning round kind of answer.

What's the biggest potential surprise or what gets too much airtime? Jamie, why don't you kick us off? Yeah, sure.

I would say the biggest surprise that – well, I think there'll be a few surprises that unfold in each too, but I think one in particular is that the USELO ETF market has the potential to reach 20 billion of inflows by the end of this year. This would be remarkable because, again, we're forecasting right around 190 billion, so right around 200 billion. That would be roughly 10% of the market this year.

We see this as a growing part of the CLO market, of course, moving forward. I would say this is probably perhaps one story that has not been talked about quite enough. It's just how resilient that part of the market has been.

Well, I like we kick it off with a positive surprise. Doug, can you keep us going with positive surprises or positive? I'll go with what are people not talking about that they should be thinking about.

One word, engines. We talked about engines earlier as a potential power plant, but engines broadly in the sector are a really interesting issue. We've actually seen an odd set of circumstances where nearly new airplanes are being broken up and thrown away because the two engines are worth more together as engines than they are when attached to an airplane.

It's a really bizarre dynamic where we've seen prices of new airplanes go up contractually, roughly 3% to 4% per year. Yet the prices of the engines, if they're purchased alone, are going up by 8% to 13% a year. So engine maintenance costs are becoming a rising issue for airlines globally.

Ultimately, as prices go up, supply demand kicks in. So I'm concerned that engine pricing might be one of the real barriers to significant further growth of traffic in this industry. It's something to keep an eye out on, and we'll talk about it in our upcoming conference in September.

So that's roughly the equivalent of the theme from The Graduate where they say one word, plastics. Your one word is engines. Okay, great.

And the conference, just to have everyone, the date in their mind, it's? Yes, from September 8th through September 10th, that's the week of U.S. Labor Day, we will be hosting our 16th Annual Aviation Forum.

Last year here in New York, where we'll be having it again, we had more than 750 people in attendance to meet with lessors, aviation manufacturers, and airlines. This year we have 32 leasing companies committed to speak. 30 of those 32 leasing companies will be represented by their chief executive officer, president, or managing partner. So please speak to your Deutsche Bank sales coverage to get an invitation to this event on September 8th through 10th.

All right, back to the potential surprise or things that people are talking about too much or not enough, Bipul. Yeah, so biggest potential surprise for me would be a rate cut before year end. That would be good for CRE and CMBS market.

And one topic which is under-discussed, even though data centers continue to receive disproportionate market attention, I feel that people are not talking enough about lease structures of these data centers. Reportedly, some data center leases include termination options triggered by power access interruptions. So I would say that.

Kayvon, how about on the AVS side? Sure, I'd say on the maybe too much airtime question, I'd say the New York Fed consumer credit panel delinquency data. This is the delinquency data that shows up in the household debt and credit report.

Yeah, I'd say the K-shaped economy narrative is pretty well accepted at this point and delinquencies are a problem. But this data overstates delinquencies by including defaulted loans. It's not comparable to the delinquency numbers we see reported in monthly servicer reports in AVS, but it's frequently cited in the headlines.

And I think even today in the Wall Street Journal was an article about Fed delinquencies. OK, last but not least, I'll round it out with a positive surprise. We could see a very significant pickup in HELOCs and second lien securitizations.

There's $34 trillion of home equity trapped in people's homes, and they will be looking to unlock that over the course of the next few years. But if I could just kind of round it out with revisiting that theme of resilience, the securitized market has come through all of those same things that the economy has gone through with very strong credit stories, very strong issuance stories, and actually has been a real source of spread pickup and yield pickup for the investors that are active in the space. We think that'll still be a very attractive place to be over the course of the next six months and appreciate all of the feedback we get on our research.

And please feel free to reach out to any of the analysts here and engage them on any of the comments they made. And always appreciate your time to listen to The Podcept. And thanks for joining us today.

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