US Dollar Credit Supply: 2023 Supply forecasts

Corporate supply is forecast at no more than US$600bn in 2023

Corporate supply was just US$6bn in December pushing the full year supply up to US$555bn, in line with our forecast. This is much lower than previous years, normally averaging closer to US$700bn. TMT saw the largest supply last year with US$137bn, followed by US$99bn from Utilities and US$86bn in Industrials. Looking at the beginning of this year thus far, primary markets have been rather active with US$27bn issued.

USD supply will be manageable in 2023 as we expect another year of very low net supply. We forecast USD corporate supply to be no more than US$600bn in 2023, up compared to the US$555bn last year. This is still below the average US$700bn seen in the past number of years. Furthermore, redemptions are up in 2023, to US$334bn, and net supply is expected to be rather low at just US$276bn, lower than the average US$400bn.

Financial supply totalled US$533bn in 2022, very much in line with previous years. Bank senior supply amounted to US$343bn, while Bank capital was US$53bn. A decent amount of financial supply has also been issued in the past week and a half, sitting at US$27bn thus far.  

Corporate Reverse Yankee supply expected to remain slow at €40bn in 2023

Historically, Reverse Yankee supply generally accounts for 10% of US corporate supply, which should amount to US$55bn (€55bn). Furthermore, Reverse Yankee supply is on average 19% of Euro corporate supply which we have forecast at €275bn. This also suggests €55bn for Reverse Yankee supply in 2023.

However, much like what has been seen in 2022, we expect somewhat lower Reverse Yankee supply in 2023 relative to what is mathematically indicated above, due to:

1. Instability in markets often leads to safe-haven issuance. Many US corporates will be tempted to issue domestically in USD due to the headwinds facing the market this year.
2. The unattractive cross currency basis swap, and our expectation it will remain so.
3. Initial, expected USD outperformance in 1H23, creating less attraction early in 2023.

Therefore, we forecast Reverse Yankee supply to be 38% (€15bn) lower than the normal % of US corporate and EUR corporate supply and hit €40bn in 2023. This will still be up on last year’s c.€30bn.