Report2 September 2022Updated 2 months ago

US Dollar Credit Supply: Pick up in August supply  

Supply picked up in August compared to June and July. While corporates saw lower supply in August relative to previous years, financials saw a significant increase

Executive summary

Corporate supply in August is up on June and July

The pick up in corporate supply in August compared to June and July pencils in the second highest month of supply this year after March, with US$50bn. However, it is still lower than last August. Thus, supply is still trailing the previous year on a YTD basis, currently at US$397bn, down from US$500bn YTD last year. Redemptions were US$48bn for the month, resulting in a net supply of US$1.9bn. Redemptions in September are set to be US$41bn.  

The TMT sector had the most supply last month, with US$27bn. In terms of YTD supply, the TMT sector totalled US$111bn, also the highest among all sectors. The Utilities sector follows with US$10bn in August, the YTD supply now totalling US$71bn. Only the Autos sector is showing a positive difference to last year’s YTD figures with a 46% increase from US$16bn last year to US$24bn so far this year.

Corporate Reverse Yankee supply is now at €20bn YTD. EUR spreads have underperformed against USD spreads over the past month, thus the USD EUR differential has tightened significantly. This closes the door for some Reverse Yankee supply, particularly in the 5yr area, However, as overall supply is low, we do not expect Reverse Yankee supply to be substantial. 

Substantial financial supply in August compared to previous years

Financial credit supply saw a slight increase in August, increasing from US$52.3bn in July to US$61.1bn. This is the highest amount in August for the past four years by a considerable margin. Redemptions were low in August at just US$16.3bn, putting net supply at US$44.8bn, the second highest level after March’s US$58.9 figure. Financial credit supply is now sitting at US$431bn YTD, the highest YTD level of the previous six years.

Naturally, bank supply accounted for most of the financial credit supply where Bank senior supply accounted for a significant US$41.6bn this month compared to only US$15bn last year, and Bank capital supply accounted for US$9bn this year compared to US$6bn last year.