Increases in investment-grade credit securities new issuance have been observed with contracting yield spreads and strong relative bond returns. In contrast, spread expansion and a major decline in both relative and absolute returns usually accompanies a sharp decline in the supply of new credit issues. Th ese outcomes are in stark contrast to the conventional wisdom held by many portfolio managers that supply hurts credit spreads. What reason can be off ered for the observed relationship between new supply and changes in credit spreads?