US Dollar Credit Supply: Large financial supply in April

Negative net corporate supply in April

Corporate supply amounted to US$30bn in April. This is in line with previous years as April normally is a slow month for supply, but not compared to last year’s record- breaking US$215bn. On a YTD basis, supply is sitting at US$281bn, running ahead of previous years, with the exception of last year. As it stands, all previous year’s YTD figures are around 35% of their total year end supply. At current levels, supply this year is at 35% of our forecasted US$800bn for the year end.

Redemptions totalled US$38bn in April, leaving a negative net supply of US$8bn. The next two months are set to see a substantial number of redemptions totalling US$46bn in May and US$51bn in June. Therefore, we may expect to see a pick-up in supply for the coming two months.

The consumer sector was most active in April with US$10bn in supply. TMT and Utilities were relatively low at just US$3bn each, however they still have pencilled in the largest supply on a YTD basis with a considerable US$108bn from TMT and US$51bn from Utilities.

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 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 and 3m vs 6m roll offers an attractive cost saving for US corporates issuing in Euro.

Substantial financial supply in April leaves YTD figure ahead of previous years

Financial supply totalled US$66bn in April, the largest month of supply this year. This is significantly larger than previous years, even last year’s US$60bn. This has pushed YTD supply up to US$212bn, to mark in the second largest YTD figure after US$222bn supplied by this time last year. Redemptions amounted to US$43bn in April, resulting in net supply totalling US$23bn.

Bank senior supply amounted to US$51bn in April, of which US$30bn was issued as Bail-in debt while US$21bn was issued as preferred debt. On a YTD basis Bank senior Bail-in is pencilled in at US$50bn, up considerably on US$17bn supplied last year YTD. Similarly, Bank capital supply is up on last year’s US$23bn pencilling in US$34bn, of which US$21bn was supplied as AT1.