US Dollar Credit Supply: Record-breaking supply in 2024

US elections kept corporate supply in November slightly low

In November, USD corporate supply reached US$40bn, nearly matching the levels in October but significantly lower than the figures observed in previous Novembers. This is unsurprising as there were more limited issuance windows due to the US election. YTD supply totalled US$787bn, the highest volume since the record-breaking numbers of 2020.

The Oil & Gas sector led monthly supply in November with US$11bn, rebounding from zero issuances the previous month. This sector also saw the highest increase on a YTD basis, with total issuances more than doubling compared to 2023, reaching US$73bn.

The cross-currency basis swap equation has changed notably – the EUR basis discount has evaporated and is now trading at close to zero. As detailed in our EUR/USD Cross Currency Swap report, there is no mechanism to reverse this, at least not for now. In addition, the large outperformance of USD credit versus EUR credit has left the 5yr differential (with rate adjustment) in negative territory, and the 10yr at very tight levels.

The spread differential component does leave some potential opportunities for Yankee supply, as it may become cheaper for European corporates to issue in USD. In which case, for as long as this current equation lasts it could be a technical positive for EUR credit. However, due to the differential longer on the curve and combined with the now very low cross currency basis swap, Reverse Yankee supply also becomes more attractive to issuers. We continue to like and see value in Reverse Yankee bonds, generally offering a decent NIP and performance after issuance in the secondary.

Record-breaking supply for USD Financials in 2024

In November, USD Financials supply reached US$52bn, bringing the YTD total to US$583bn, the highest in the past five years.

November's supply was primarily driven by preferred senior issuances at US$22bn, along with non-preferred senior issuances and bank capital, each contributing US$10bn. On the contrary, the Insurance and Finance sectors experienced a sharp decline from last month's figures, issuing US$5bn and US$2bn, respectively.