US Dollar Credit Supply
Relatively low supply seen in August
YTD corporate supply now sits at US$500bn of the US$650bn forecast for the year
• Supply in August totalled US$35bn, lower than previous year’s level. Although this is
higher than June’s supply and, more notably, July’s. We expect supply in September
to increase to the usual heavy amount for the month. Corporate YTD supply now sits
at US$500bn, and after redemptions, YTD net supply now sits at US$117bn.
• Net supply this year will still be low, but we revise our forecast modestly higher to
US$650bn on the back of slightly heavier supply seen in the first six months of this
year. But we still expect supply to slow in the second half of this year as large
prefinancing has been done and many issuers will be looking forward to potential
rate cuts in 2024.
• In terms of spread levels, we don’t expect any further USD spread outperformance in
the coming months. Already USD spreads have tightened to the low end of the
trading range, the spread differential between USD and EUR on an asset swap basis is
now at average levels historically. Furthermore, EUR spreads do have more potential
for tightening to low levels seen through the years, relatively. Lastly, on a G-spread
basis, the differential is actually inverted.
• YTD corporate Reverse Yankee supply is now sitting at €32bn. We forecast up to
€45bn for the year. We expect relatively slow supply in the coming months,
particularly now the equation for a cost saving advantage is becoming less
favourable for US corporates with USD spread outperformance.
Low supply in August, YTD supply running well behind previous years
• Financials supply amounted to US$29bn in August, lower than the level seen in
August in previous years. This has resulted in a larger lag of financials supply when
compared to previous years, with just US$290bn supplied on a YTD basis.
• Bank bond supply accounted for US$22bn in August, of which, US$18bn was senior
and US$4bn was bank capital. On a YTD basis, senior bank bond supply sits only at
US$180bn, versus US$279bn issued by this time last year. Similarly, bank capital
supply has seen US$29bn come to the market thus far this year, compared to
US$42bn last year.