Euro Credit Supply: Corporate net supply hits €326b

• Corporate supply in November totalled €30b, up on October’s €25b and higher than the €22b seen in November last year. Supply year-to-date is now at €326b. This will approach €335b over the next month, ending the year just about €100b lower than the record breaking €442b in 2020. With redemptions pencilled in at €214b for 2021, net supply is already at €111b. This will likely approach €120b by the end of the year. This is a substantial fall compared to the average €230b of the past two years. This was of course very supportive for the technical picture in credit this year. We forecast net supply to fall further in 2022, down to just €67b, with lower forecast supply of €290b and increased redemptions of €223b. Therefore, we expect strong technicals in credit next year which will likely dominate, keeping spreads compressed and supported.
• Industrials and Utilities saw the largest supply in terms of sectors, with €8b and €7b in November, respectively. Similarly, on a YTD basis, Industrials and Utilities lead with €52b and €53b respectively, alongside Healthcare at €58b. Last month saw €3b in Corporate Hybrid supply. Hybrid supply is now at €35b, below the €42b supplied last year. However, this is still the second largest year on record, surpassing the year end average of €20b. We forecast corporate hybrid supply at €30b next year, a slightly lower amount, but still notable when compared to previous years.  

Financial net supply up compared to last year

• Financial supply totalled €30b in November, with the YTD supply figure now at €261b. Financial supply this year is very much in line with 2019, and is larger than the average €240b of previous years. Redemptions this year are relatively high at €205b, resulting in net supply currently totalling €56b. This is up slightly on last year’s €40b net supply. Next year, redemptions are lower at €179b - we forecast larger supply of €290b. Net supply, therefore, comes to €110b. Additionally, bank debt receives no support from the European Central Bank's purchases. Higher net supply and no demand from the ECB is less supportive for spreads. 
• Covered bond supply is currently pencilled in at €97b YTD, just shy of last year’s €101b. Similar to last year, this is substantially lower than the €150b average of the couple of previous years.