Euro Credit Supply: Significant supply in 2024, more in 2025

Corporate supply ends at €390bn, expecting more in 2025

• Euro corporate supply closed the year at a rather considerable €390bn, the highest annual level since 2020. We expect a further increase in supply in 2025 – up to at least €400bn – as increased CAPEX and M&A activity add to the increasing redemptions. This should make it the heaviest year on record since 2020. Net supply is therefore also set to rise, to €124bn. This plays a part in a deterioration of technicals – when CSPP redemptions rolling off the curve are taken into account, alongside the inflows expected, we calculate that around €154bn will need to be absorbed by the market in 2025.
• From a EUR sector perspective, 2024 was a standout for real estate which tripled last year’s figures, rising from €8bn to €24bn. The healthcare sector also saw a significant increase, with supply reaching €35bn in 2024, nearly double the amount issued in 2023. All other sectors showed a solid increase in supply, averaging around 20% YoY growth, and contributing to a very good 2024 for corporate supply.
• An interesting dynamic has formed with the cross-currency basis swap and USD EUR spread differential, whereby the discount for the EUR basis has been removed leaving the XCCY closer to zero. This creates a much less costly ability to swap and thus creates significant potential for Reverse Yankee supply, although this is limited to the long end. Currently USD spreads are trading at very tight levels, particularly on the short end, resulting in a notable attraction for European issuers to do Yankee deals. Already we have seen a strong start to the year with €8bn in corporate Yankee supply from the likes of EDF, CRH and Daimler, and a considerable €18bn in financial Yankee supply from the likes of Credit Agricole, Soc Gen and BPCE.

Record-breaking financial supply in 2024

• With no further EUR Benchmark covered bond supply in December, 2024 crossed the finish line with €151bn in EUR benchmark size issuance and €159bn including all bonds. Elevated covered bond spread levels from wider Govie/SSA trading levels make it unlikely that 2025 kicks off remotely close to the over €40bn January print of the last two years. We expect this month’s issuance to stay well below the past decade’s €28bn January average, and full year covered supply to reach €155bn.
• The last month of 2024 also proved very quiet in the senior unsecured segment, with only €1.6bn issued as senior preferred bonds and nothing in the bail-in segment. We expect gross senior unsecured supply to reach €200bn, split between €90bn in preferred and €110bn in non-preferred senior instruments.
• Total gross bank bond supply is expected to reach €400bn in 2025, slightly below the 2024 total, mostly due to the end of the TLTRO III refinancing and sluggish expected economic growth. High redemption numbers for this year as well as for 2026 (for covered and senior bonds) are the main variables affecting the still high supply.