US dollar credit supply running ahead of previous years so far

Corporate supply totalled US$54bn in June, pushing the YTD total up to US$410bn. This is largely ahead of previous years on a year-to-date basis which averages at US$390bn, with the exception of last year. Supply is gearing up to be a sizeable amount this year, and we expect it to total US$800bn. TMT and Utilities were the sectors with the most supply, coming in at US$19bn and US$17bn, respectively. TMT supply has already reached US$158bn on a YTD basis. Although TMT redemptions are also high, set at US$106bn for 2021. Similar to Euro, USD corporate supply has largely been concentrated at the longer end of the curve. This has been one of the catalysts in pushing curves steeper.

Reverse Yankee supply has not been as heavy as forecast at just €26bn YTD. We had initially pencilled in a forecast of €80bn for Reverse Yankees in 2021. However, USD spreads, particularly at the short end of the curve, have not yet underperformed against EUR. We still expect USD spreads to underperform when we do see some weakness in credit in the second half of the year. This will, in turn, increase Reverse Yankee supply, however we will struggle to reach €80bn.

Financial supply totals US$317bn on a YTD basis

Financial supply came to US$51bn in June, much in line with previous months. Supply on a YTD basis has amounted to US$317bn. This is notable, running ahead of previous years, with the expectation of last year. On average, supply would normally be sitting around US$240bn for the first half of the year. Redemptions in June were just US$22bn, leaving net supply at US$30bn. As it stands, net supply is pencilled in at US$100bn for the year thus far. Redemptions in July will jump to US$32bn, meaning we may see a relatively busy month of July in terms of issuance, or net supply will be lower.

Bank senior supply totalled US$28bn in June, of which US$10bn was Bank Bail-in supply and US$18bn was Bank preferred supply. Bank Bail-in debt has become increasingly popular, with US$79bn supplied thus far this year, compared to just US$35bn last year YTD. Bank Capital is also up on last year, now sitting at US$49bn this year versus US$40bn in 2020 YTD. Interestingly, the majority of financial supply has been between the 3-9yr bucket in June. However, on a YTD basis, supply is spread more evenly across the curve.