US Dollar Credit Supply: Small pickup in financial supply

Corporate supply in June was low, totalling just US$29bn and the lowest monthly total of 2023. Supply was only slightly below June 2022 levels. Year-to-date supply is still substantial at $428bn, ahead of previous years and topped only by the extraordinary supply of $790bn in the first half of 2020.

With $54bn in redemptions, net supply was negative at -$25bn, similar to the situation in April this year. After heavy supply in May, healthcare was down substantially with a mere $1bn issued in the whole month. Telecom saw a strong decline as well, going from $29bn in May to $1.6bn in June. Whilst those sectors saw diminishing activity, none of the remaining sectors featured a significant increase in supply when compared to previous months.

Reverse Yankee saw a decline as well, standing at €2.7bn and down from €12.2bn in May. Total supply in 2023 so far is now at €30.4bn, close to the total of €32.9bn issued in 2022. We have seen USD spreads outperform in recent weeks, pushing the USD-EUR spread differential (particularly around the five-year area) tighter. This makes Reverse Yankee supply less advantageous for US issuers to swap, and thus we could see lower levels of supply in the coming months.

Contrary to corporates, financials supply was up in June, with $39bn in new issuance. This is the opposite of May, where financials supply was down and corporate supply was up.

At $17bn, most issuances were preferred seniors, contributing to the current level of YTD supply at $209bn. This is significantly lower than in previous years and is comparable with levels seen in 2019.