Euro Credit Supply: Summer lull shapes corporates and banks’ July supply
At a Glance
The slowdown in Euro credit supply during July reflects the traditional summer lull, which manifested in a significant drop to €17 billion in issuance from €52 billion in June, highlighting sector disparities with utilities and TMT leading growth. Per the full note source, while net supply remained steady with redemptions balancing new issues, tight spreads contributed to robust primary demand with year-to-date issuance at €308 billion, 11% ahead of last year. This environment could pose implications for EUR liquidity, especially if the momentum in corporate issuance does not accelerate post-summer.
Key Takeaways
- 01July Euro corporate issuance fell sharply to €17 billion due to the summer lull.
- 02Utilities and TMT sectors dominated issuance, together accounting for 45% of YTD supply.
- 03Strong demand continues for primary credit despite overall issuance slowdown.
- 04Year-to-date issuance remains robust, outpacing last year's figures by 11%.
Full Analysis
What the desk is arguing
The recent report indicates that Euro corporate supply contracted significantly in July, primarily due to the seasonal slowdown typical of this period. Notably, the issuance dropped from €52 billion in June to just €17 billion, with utilities and technology, media, and telecom (TMT) sectors emerging as the primary sources of July issuance, contributing a combined €9.2 billion. This creates a contrasting dynamic as sectors like healthcare and autos saw no new issuance, indicating sector-specific pressures.
Strong demand in the primary market has been supported by tight credit spreads and rising all-in yields, which helped boost year-to-date issuance to €308 billion, marking an 11% increase over the same period last year. The data reveals that utilities and TMT sectors are significantly outperforming others, with year-on-year growth rates of 45% and 31%, respectively, reinforcing their role as critical growth engines within the euro credit landscape.
How other firms see it
Firms generally align with the sentiment that substantial summer lulls in corporate issuance can create volatility in credit spreads and liquidity. However, contrary views suggest potential overheating in credit valuations particularly in the TMT and utilities sectors, cautioning that such dynamics could reverse unexpectedly as macroeconomic conditions evolve.
Looking ahead, the performance of the EUR/USD may be particularly sensitive to evolving credit supply dynamics and could reflect the broader health of the Eurozone economy, with potential insights from central bank signals and equity market performance.
Market Implications
Traders should closely monitor issuance levels and spread changes in the wake of the seasonal slowdown, particularly in the utilities and TMT sectors, as any further tightening in credit conditions could influence the EUR liquidity landscape. A significant shift in issuance patterns could set the stage for volatility in the EUR/USD, especially if macroeconomic indicators deviate from current expectations.
From the original
Reports Report Euro Credit Supply: Summer lull shapes corporates and banks’ July supply Published 07:30 Credit Corporate and financial supply slowed in July because of the summer lull. Utilities and TMT remain the main growth engines for corporate supply Timothy Rahill and Marine
Related speeches
4 itemsEuro Credit Supply: Supply continues at a strong pace
The desk interprets the strong demand for Euro credit supply as indicative of a resilient corporate sector, despite a slight decrease in issuance from May. Per the full note [source], June saw corporate issuance of €51bn, which, although lower than May's €68bn, is still well above historical averages and brings year-to-date totals to €289bn. This momentum suggests a robust backdrop for Euro denominated assets, particularly as ESG issuances remain a focal point and hybrid debt begins to gain traction. Current trading indicates a mix of stability and the potential for upward pressure on the Euro if these trends persist into the second half of the year.