US Dollar Credit Supply: Strongest corporate supply seen in August
At a Glance
The desk views the surge in US corporate credit issuance as a sign of resilient financial health and potential dollar strength moving forward. Per the full note from ing-think, August marked a record US$116 billion in corporate issuance, surpassing previous highs and indicating a strong appetite for long-term financing amidst prevailing uncertainty. Year-to-date figures show a total of US$878 billion, significantly outpacing totals from past years and highlighting a clear divergence in sectors, particularly with TMT leading the charge. While bank issuance has slowed slightly, the overall trend suggests corporates are favoring extended maturities, which may enhance dollar liquidity and influence FX dynamics in the coming months.
Key Takeaways
- 01August 2023 recorded US$116 billion in corporate credit issuance, the highest on record.
- 02Year-to-date USD corporate issuance reached US$878 billion, significantly outpacing totals from the previous years.
- 03The TMT sector remains the strongest contributor to credit issuance, indicating a bullish sentiment in the market.
- 04Banks' issuance has slowed but remains robust compared to historical levels.
Full Analysis
What the desk is arguing
The desk believes that robust corporate credit supply will bolster demand for the US dollar. The record August issuance of US$116 billion indicates a strong corporate appetite for financing, reinforcing a positive sentiment in USD liquidity conditions, as highlighted by ing-think.
Strong figures from the Technology, Media, and Telecommunications (TMT) sector, which alone accounted for US$43 billion, further underscore the bullish momentum. Year-to-date figures reveal that corporate issuances have already reached US$878 billion, which is well above previous yearly totals from 2021 to 2024.
Where it sits in our coverage
Our consensus target for the USD/EUR pair is set at 1.075, with an established range between 1.04 and 1.12. The following firms have provided targets:
This perspective aligns firmly with jpmorgan, predicting a slightly stronger US dollar over the coming months, marking the desk's outlook as largely in line with the upper end of the current consensus range.
How other firms see it
Aligned firms like jpmorgan and other related entities endorse a bullish outlook on USD, while firms such as bofa present a more cautious stance. The differing views reveal the ongoing tension between anticipated Fed policy shifts and emerging global economic indicators.
Relevant currency pairs to watch include USD/JPY and EUR/USD, particularly as they interact with ongoing expectations for central bank policy adjustments.
Market Implications
Watch for USD strength, particularly against the EUR and JPY, as increased corporate issuance may lead to enhanced liquidity. The upcoming Fed meeting could also shift the dynamics if interest rates are adjusted, influencing USD valuation.
From the original
Reports Report US Dollar Credit Supply: Strongest corporate supply seen in August Published 13:00 Credit August issuance reached a record US$116bn, surpassing the previous high set in 2020 Timothy Rahill and Marine Leleux Download PDF Strongest corporates issuances on record in A
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4 itemsUS Dollar Credit Supply: July supply stays strong despite summer period
The desk observes that US Dollar corporate credit supply remained unexpectedly robust in July, a trend typically muted during the summer months, signifying sustained demand for USD-denominated assets. Per the full note [source], July saw corporate supply decline to $82.6 billion from $110.7 billion in June but still outperformed the same month in previous years, with year-to-date supply nearly 56% higher than 2022. This scenario is supported by tight spreads and healthy fund inflows, particularly in the Technology, Media, and Telecommunications (TMT) sector. The prevailing strong USD environment, along with stable bank issuance, indicates potential resilience in corporate credit markets amidst broader volatility expectations.
US Dollar Credit Supply: Supply continues at a strong pace
The desk argues that the elevated levels of US dollar credit supply could suggest ongoing liquidity and a supportive environment for USD-denominated assets. Per the full note by Rahill and Leleux, corporate supply hit $110 billion in June, nearly doubling the issuance from the same month last year and bringing the year-to-date total to $685 billion. This robust issuance is significantly ahead of previous years, indicating strong demand and providing confidence for continued issuance as companies prepare for capital expenditures.