Euro Credit Supply: Expect higher supply in September

The summer ended with a substantial €19bn in corporate supply coming to the market in the last week of August. This pushed the August total up to €22bn, which was otherwise, as is the norm, a very quiet month. Redemptions in August totalled €7.2bn, thus net supply amounted to €15bn. This added some widening pressure in the past couple of weeks.

We expect September will ring her usual busy bell of heavy supply, already seeing €7bn thus far. This could add some slight pressure on spreads over the coming weeks. Corporate YTD supply now sits at €227bn. We maintain our view that supply will end the year between €270bn and €300bn, as we expect October through to December will be relatively slow.

Autos and Industrials remain the strongest sectors in terms of supply, both having a total YTD issuance of €41bn. Utility supply has also been decent with €5.4bn in August, bringing it to a total YTD supply of €40bn. The real estate sector, on the other hand, has seen very little supply this year, with just €6bn, compared to €22bn seen this time last year.  

YTD corporate Reverse Yankee supply is now sitting at €32bn. We forecast up to €45bn for the year. We expect relatively slow supply over the coming months, particularly now the equation for a cost saving advantage is becoming less favourable for US corporates with USD spread outperformance.