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 source, 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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4 itemsUS dollar credit supply: Supply continues at strong levels
The ongoing strength in US dollar credit supply signals persistent demand for dollar-denominated assets, even as levels normalize from March's peaks. This trend suggests that while there may be some cooling from the immediate surge, the underlying demand remains robust, which plays into broader themes of dollar liquidity in the global financial system.
Euro 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.