US Dollar Credit Supply: Supply continues at a strong pace
At a Glance
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.
Key Takeaways
- 01US dollar credit supply reached $110 billion in June, a significant increase from last year.
- 02Major sectors driving issuance include technology, media, and telecommunications, indicating strong market confidence.
- 03Net demand for USD credit remains robust, supported by positive inflows and elevated corporate cash balances.
- 04The current bullish sentiment is reflected in our consensus target for USD movement.
Full Analysis
What the desk is arguing
The desk believes the recent spike in US dollar credit supply will maintain a bullish sentiment for USD assets in the near term. Per the full note , corporate issuance is not only surpassing last year's levels but also trending well ahead of previous years, largely fueled by sizable contributions from the technology, media, and telecommunications (TMT) sector.
Key data supports this outlook; TMT sectors accounted for over $40 billion of the total corporate supply in June alone. Additionally, demand remains strong, bolstered by positive inflows into USD investment-grade funds and corporations sitting on significant cash balances, which bodes well for continued supply absorption.
Where it sits in our coverage
Currently, our consensus target for USD movement against other major currencies is set at 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This bullish outlook sits in the upper end of our cross-firm consensus, driven by the current market conditions supporting USD credit issuance and demand dynamics.
How other firms see it
Many firms, including jpmorgan, are aligned with the bullish sentiment on USD, reflecting robust credit supply dynamics. Conversely, bofa presents a more cautious outlook, suggesting potential vulnerabilities in the growth of credit supply versus other economic factors.
Monitoring USD/EUR movements will be crucial as the trajectories of both economies play a pivotal role in the relative strength of the dollar, especially in light of upcoming monetary policy decisions.
What the calendar says
With no high-impact events on the immediate calendar, traders should remain focused on market sentiment and credit supply trends as key indicators influencing USD movements.
Market Implications
Traders should monitor the continued strength of USD which appears bolstered by corporate supply dynamics—watch for possible levels around 1.075 to evaluate trends. With no scheduled events, shifts in credit supply and demand will be crucial.
From the original
Reports Report US Dollar Credit Supply: Supply continues at a strong pace 16:07 Credit US Dollar supply continues to run largely ahead of most previous years Timothy Rahill and Marine Leleux Download PDF Executive summary Corporate supply accelerates further in June Corporate sup
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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: Strongest corporate supply seen in August
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