Euro Credit Supply: Issuance surges in September
At a Glance
The recent surge in euro credit supply, particularly from the technology, media, and telecom (TMT) sectors, is a significant indicator of underlying market strength as corporate issuance reached €56bn in September, up from €25bn in August. This development, noted by Timothy Rahill and Marine Leleux, signals a broad reopening of the primary market with year-to-date issuance at €389bn, outpacing last year's figures by approximately 11% . Given that bank bond supply also surged with €57.5bn printed, a trend that reflects confidence in credit markets, the implications for the forex landscape, particularly EUR movements, are clear. The improving euro credit supply could bolster the euro as investors seek exposure to expanded corporate debt markets, pushing against previous conservative positions in the currency.
Key Takeaways
- 01Euro credit supply rose to €56bn in September, demonstrating market recovery.
- 02Year-to-date issuance is 11% higher than last year, indicating strong corporate confidence.
- 03Bank bonds specifically saw a surge, reflecting positive sentiment in credit markets.
- 04The euro may experience upward pressure as demand for corporate debt grows.
Full Analysis
What the desk is arguing
The desk argues that the significant rise in euro credit supply will have a positive impact on the euro's exchange rate, potentially inviting upward pressure as investors flock to corporate bonds. Per the full note, the corporate primary market saw issuance more than doubling month-on-month, with notable contributions from TMT and a robust performance in bank bonds.
The bank bond segment’s remarkable performance, with a €20bn increase to €57.5bn, underscores a marked recovery in market sentiment. September's total issuance figures indicate growing corporate confidence, which is likely to elevate demand for the euro.
Where it sits in our coverage
In our coverage, we observe a consensus target for the EUR/USD at 1.075, ranging from 1.04 to 1.12. Specific firm targets reflect this bullish outlook: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's position aligns with the higher end of the consensus range, suggesting an optimistic stance toward euro appreciation alongside the recent issuance data.
How other firms see it
Aligned firms such as jpmorgan show confidence in euro appreciation driven by economic recovery, while bofa counters with a more conservative outlook on EUR weakness against USD. This divergence illustrates the mixed sentiments surrounding euro exposure in the near term.
The yields in euro-denominated bonds and the upcoming ECB meetings are additional touchpoints to monitor, as they could affect expectations surrounding the euro's trajectory going forward.
Market Implications
Traders should watch the euro around the 1.075 level, particularly following the trends in corporate bond issuance. An increase in bond yields or signs of confidence in the broader eurozone economy could fuel further appreciation in the euro.
From the original
Reports Report Euro Credit Supply: Issuance surges in September Published 15:43 Credit The corporate primary market opened up in September with TMT being the largest contributor. Bank bond supply surged in September Timothy Rahill and Marine Leleux Download PDF Executive summary
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