Euro Credit Supply: The usual slow April

Corporate supply only €19bn in April, unsurprisingly lower than last year

• As is the norm for April there was little supply at just €19bn. This is in line with previous years except for last year which saw over €66bn as the rush to finance on the back of the crisis had begun. Net supply remained positive at just €3bn as redemptions totalled €16bn for the month. Supply on a YTD basis is now sitting at €126bn, which is still on the higher side compared to previous years. However, we are seeing a growing difference versus the substantial supply last year of €181bn YTD.
• The majority of supply in April came from the Consumer and Industrial & Chemical sectors, with €6bn and €7bn respectively. Interestingly, the Autos and Utilities sectors saw a notable negative net supply as redemptions of €3bn exceed the €1bn in supply in both cases. Corporate hybrids have seen relatively substantial supply this year thus far, already amounting to €17bn, running ahead of the €6bn YTD from 2020. Already this has exceeded many previous full-year figures. Increased Corporate hybrids supply was certainly expected as many corporates issue them for rating defence.
• Over April, Reverse Yankee supply amounted to €2.8bn. On a YTD basis, Reverse Yankee supply is sitting at €13.5bn, down versus €18bn last year YTD. Nonetheless, we still expect a substantial Reverse Yankee supply. We expect this to be driven by USD underperformance later this year, resulting in a wider USD EUR spread differential, particularly in the 5yr area. When combined with the tight Cross Currency basis swap the 3m vs 6m roll offers an attractive cost-saving for US corporates issuing in Euro.

2021 YTD financial supply runs closely to previous YTD levels

• Financial supply (excluding covered bonds) amounted to €15bn during the month of April, falling €5bn short of April 2020 supply. The 2021 YTD financial supply now aggregates to €99bn for the first four months of 2021, close to the 2020 YTD level of €103bn. We especially note that supply from financial services companies nearly doubled (€21bn in 2021 YTD vs €11bn in 2020 YTD).
• ESG financial supply totals €17.6bn YTD, which is almost five times the 2020 YTD level (€3.6bn). Covered bond supply has been notably low this year, sitting at €30bn YTD versus €60bn pencilled in by this time last year.
• With redemptions of €16bn in April, net supply was negative at €1bn. Redemptions will be somewhat similar in May. However, we note a significant jump in bank capital redemptions (€6.6bn in May vs €0.9bn in April), therefore we might expect higher supply in this bond category.