Euro Credit Supply: Record breaking corporate supply

Corporate supply and Reverse Yankee supply see significant increases

There was substantial corporate supply in May, totalling a record-breaking €52bn, the highest monthly supply seen since the covid-driven supply levels of 2020. Oversubscription levels remain very high though there has been a slight drop in average levels thus far in the second versus the first quarter, but this is marginal. NIPs continue to be low, but are also seeing slightly more on offer than in the first quarter. Indeed, demand remains high for new issues and credit as a whole. There have been some suggestions of a touch of indigestion during days of large supply. Nonetheless, spreads remain at tight, at range bound levels, and we will likely see sideways movement or a slow grind tighter through the summer.

Supply thus far this year has been focused in sectors such as Healthcare, Consumers, Utilities and TMT, resulting in a bit more underperformance in these sectors on a YTD basis. We see value in these sectors as they trade a bit on the wider side.

There has been a significant increase in Reverse Yankee supply in May, with €21bn coming to the market. YTD supply now sits at €44bn. The new deals from the US issuers look slightly more attractive, with a little bit more NIP on offer. The cost saving equation for US issuers to issue in EUR and swap back to USD is not that advantageous at the moment in the 5yr area, while there is some cost saving further out the curve.

Stable supply for banks’ senior unsecured bonds

The supply of EUR benchmark senior unsecured bonds was stable over May, reaching €16.5bn. This is split between €7.75bn in the senior preferred segment and €8.75bn in the senior non-preferred one.

Total senior preferred bond supply lays just a little over €43bn in 2024 YTD. That’s €18bn behind what was recorded for 2023 YTD. The bail-in senior bond supply is at €55bn this year, just €9bn lower than last year at this time.

In the preferred segment, Spanish issuers are leading supply followed by Norwegian banks. The bulk of senior preferred issuances we saw last month were in the 5-6yr maturity bucket, representing over 70% of the total supply. Spanish banks are also the most active in the bail-in segment, just behind Italy.

Last month also saw a significant number of sustainable issuances. Notably in the bail-in segment, sustainable instruments made up 60% of last month’s supply.