Euro Credit Supply: Limited supply

Corporate supply was €25bn in September, lower than in previous years

Corporate supply amounted to €25bn in September. This is much lower than the average €45bn of recent years. We don’t expect much more supply to come in the ensuing months as much higher funding costs, combined with a volatile market is leaving a rather unattractive environment for issuers. For the coming months, there should be brief windows of opportunity when the markets offer a period of stability.

Corporate supply is now sitting at €202bn thus far this year. We expect no more than €250bn for the year. This will leave supply €100bn short of what was issued last year. Redemptions this year are pencilled in at €223bn. As such net supply will be very low this year. When the purchases of CSPP (and PEPP) and coupon payments are included, net supply is negative, and this leaves the technical picture very strong. 

On a YTD basis, the Utilities sector still has the largest credit supply with €43bn followed by Industrial & Chemicals at €35bn, while the Healthcare sector has seen the lowest credit supply with €18bn. In terms of maturity, the 2-6yr maturity bucket has seen the most credit supply with €8bn in September but the 6-9yr maturity bucket remains the one with the highest YTD figure of €57bn.

Corporate Reverse Yankee supply is now at €25bn YTD, after €4bn was issued in September. This is significantly lower than previous years. Limited primary market activity due to the volatile markets and higher funding costs has resulted in supply being concentrated in local currency, and thus relatively lower Reverse Yankee supply.

Financials supply still running ahead of previous years

Financials supply amounted to €25bn in September, matching that of August. This is lower than last year’s €37bn figure. Banks senior supply accounted for €19bn of last month’s supply. Financial supply is now sitting at €221bn YTD, still running slightly ahead of previous years.

Another €22bn in covered bond supply in September, following €16bn in August. Covered bonds remain a fan favourite for banks to issue. YTD supply is now at €174bn, up considerably compared to the €101bn full year figures seen in 2020 and 2021.