US Dollar Credit Supply: Low corporate supply; high financial supply

Corporate supply was rather low as issuers are navigating volatile spreads

Corporate supply was rather low in January at just US$28bn, down on the US$32bn in 2021 and down from the US$50bn seen in both 2019 and 2020. Redemptions were US$31bn last month, meaning net supply was negative at -US$3bn. Significant prefunding over the past couple of years, earnings black-outs, rising rates and volatile spreads have had an effect on supply levels. Therefore, issuers have been selective in coming to the market. This further confirms our expectation for a drop in corporate supply in 2022

We are forecasting USD corporate supply to amount to just US$650bn. Similarly, we forecast US corporate supply (in $ and €) to be lower in 2022 at US$630bn, down from the US$685bn seen last year. The drop is based, similar to European issuance pressures, on the back of factors such as pandemic-related funding needs continuing to subside and high levels of cash on the balance sheet outweighing potential rises in capital expenditure or M&A related issuance.

Substantial financial supply as Banks look for prefunding ahead of rate hikes

Financial supply amounted to a substantial US$84bn in January, up on the average US$60bn seen in previous years. Redemptions were indeed on the high side at US$46bn, but net supply was significant nonetheless at US$39bn. The supply is very much concentrated from Bank senior, namely Bank senior preferred, with US$47bn. Issuers targeted the 9-12yr maturity bucket in January, with US$25bn of supply.

Supply in February has kicked off strong with US$10bn in the first two days. YTD supply is now sitting at US$94bn, the highest YTD amount over previous years. Banks are looking to do some pre-funding ahead of impending rate hikes and widening spreads.