Euro Credit Supply: Supply continues at a strong pace
At a Glance
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 , 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.
Key Takeaways
- 01June corporate issuance of €51bn shows resilience despite a decline from May's numbers.
- 02ESG bond issuance reached a monthly peak of €18bn, indicating a strong sustainable finance trend.
- 03Year-to-date totals for Euro credit issuance (€289bn) outpace 2022 figures significantly.
- 04Continued hybrid issuance suggests a developing preference for innovative financing structures.
Full Analysis
What the desk is arguing
The desk frames the current Euro credit supply landscape as a strong signal of corporate health, citing June's issuance figures. According to the report, June's €51bn issuance continues to reflect a sturdy economic backdrop, with year-to-date totals significantly outpacing last year's figures.
Particularly notable is the €18bn in ESG issuances, marking a new peak for 2023. This aligns with the ongoing trend of increased focus on sustainable finance, accounting for a record total of €64bn year-to-date, further solidifying the Euro credit market's potential within broader financial strategies.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a range ceiling of 1.12 and a support level at 1.04. Key firms with specific targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, sitting slightly above their projections, while contrasting with bofa's more cautious stance, which could influence market movement in the coming months.
How other firms see it
Firms like jpmorgan and others share an optimistic outlook on Euro credit, aligning with the positive sentiment emerging from the latest issuance data. Conversely, bofa takes a more conservative approach, leaning towards caution in their forecasts.
Key areas to monitor include the potential effect of rising ESG issuance on overall Euro stability and the dynamics between EUR/USD and broader risk sentiment in global markets, especially tied to corporate health indicators.
Market Implications
Traders should watch for EUR/USD movement particularly in response to upcoming issuance trends, as sustained high levels could bolster the Euro. A break above 1.075 may indicate strengthened investor confidence in Euro credit markets.
From the original
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4 itemsEuro Credit Supply: Primary markets reopen early
Lead — With an increase in euro corporate issuance in August signaling a robust liquidity environment, the primary markets are exhibiting resilience as they reopen earlier than anticipated. Per the full note from ing-think, corporate issuance climbed to €24bn in August, significantly surpassing July's €17bn, reflecting a shift that could influence forex dynamics in the region. This increase aligns with a strong year-to-date issuance of €332bn, presenting a backdrop that may lead to strategic positioning in euro pairs. Therefore, the operational environment in the euro zone may underpin a softer euro, especially if demand for European credits continues to shift considerably during this period.
Euro Credit Supply: Summer lull shapes corporates and banks’ July supply
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.