US Dollar Credit Supply: Low net supply to kick-start the year

Corporate supply kick starts the year at US$43bn

Corporate supply totalled US$43bn in January, up from 2021 and 2022, but still lower than the figures seen in 2019 and 2020. Redemptions in January were US$39bn, resulting in a very small net supply of just US$3.5bn. Utilities issued the most in January, accounting for US$13bn, followed by industrials issuing US$9bn. The 6-9yr maturity bucket saw US$15bn supply last month, meanwhile US$19bn was issued shorter in the 0-6yr bucket.

Corporate Reverse Yankee supply totalled €5.5bn in January, noting a small pick-up on most previous months. We forecast Reverse Yankee supply to be 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.€32.5bn. There is indeed some cost saving advantage for US corporates in the longer end of the curve at this particular time. Additionally, we expect USD spreads may remain more stable compared to the volatility we expect to see in EUR spreads. Thus, certain swapping opportunities may arise. However, on the other hand, times of uncertainty and 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. Although we do see value in certain Reverse Yankee deals as often there is an attractive new issue premium attached.

Financial supply totals US$66bn in January  

Financials supply amounted to US$66bn in January, down slightly on last year. Redemptions were substantial last month at US$68bn, resulting in a negative net supply of -US$1.6bn for the month of January.

Bank senior supply totalled US$54bn during the month, matching that of last year. Meanwhile, Bank capital supply was rather low at just US$4bn, compared to US$12bn seen in January last year. Financial supply was very much concentrated between the 3-12yr maturity bucket. With US$20bn issued in the 3-6yr bucket, US$17bn issued in the 6-9yr bucket and US$16bn issued in the 9-12yr bucket.