Euro Credit Supply: Substantial supply in March

Considerable corporate supply in March results in over €100bn supplied in 3Q

Corporate supply pencilled in a substantial €45bn in March, just marginally lower than the record breaking March last year which amounted to €49bn, as corporates rushed to secure funding at the start of the crisis. Redemptions in March amounted to €31bn, marking the highest month for redemptions this year. Nonetheless, net supply still amounted to €14bn. Redemptions for April will amount to just €16bn. Due to a lack of large refinancing needed and an already heavy March, we expect supply to be more subtle in April.

As expected, just over €100bn was supplied in the first quarter of the year. We expect close to another €100bn for the second quarter and drop down to closer to the €75bn mark for Quarter three and four. This of course totals our end of year forecast of €350bn in supply, a little under €100bn less than the record breaking 2020, and also shy of the previous record breaking €390bn in 2019.

TMT and Utilities accounted for most of the supply in March, both sectors pencilling in €9bn each. Similarly on a YTD basis, TMT and Utility account for the largest supply with €18bn and €24bn, respectively, as well as €19bn from Real Estate. Corporate hybrids supply is up YoY, to a substantial €15bn, relative to just €6bn last year. We forecast corporate hybrid supply to reach at least €50bn by the year end. Many corporates will issue hybrids for rating defence.

Corporate Reverse Yankee supply totalled €11bn in March, now sitting at €18bn YTD. This is indeed low compared to the €28bn and €27bn of 2020 and 2019 YTD figures, respectively. However, this is largely due to the low amount of Reverse Yankee supply in the first two months of the year. We expect Reverse Yankee supply to increase in the coming months and total at least €80bn by the end of 2021.

2021 YTD financial supply is running ahead of 2020 YTD

Financial supply (excluding covered bonds) amounted to €29bn in March, which is up on March 2020 (€14bn) and similar to February 2021 (€30bn). Supply totals €84bn YTD, ahead of 2020 YTD supply of €79bn. Covered bonds supplied €7bn, compared to €10bn in March 2020 and €2bn in February. Nonetheless, we note that 30% of last month’s covered bond supply was issued in a green bond format.

French and German financial companies are still leading the supply. We have already noted that the trend of issuing within the 6-year maturity and longer bucket was decreasing since January. In March, the share was 71%, versus 78% in February.

Redemptions amounted to €22bn in March, leading to net supply of €7bn, as compared to €12bn last month. €16bn will be repaid next month. As a result, we expect financial supply to be a tad lower in April.