Bank bond supply to stay at cruising altitude in 2027
Per the full note from ING's credit research desk , EUR bank bond supply is expected to hold near record levels at €450bn in 2027, with redemptions—not net new funding demand—doing the heavy lifting. Marine Leleux and Jesse Norcross forecast covered bonds at €185bn, senior unsecured at €210bn, and subordinated debt at €55bn, all framed against €400bn of maturities that represent the highest redemption wall in a decade. The critical nuance for FX is that the desk explicitly ties elevated supply to refinancing, not to a macro re-leveraging cycle: the modest growth outlook caps any upside surprise. For EUR/USD, currently 1.1253 against a 1.1600 median December-26 consensus, this is a second-order credit story, but it reinforces the wider 'steady-as-she-goes' European macro backdrop that underpins the mild euro upside in our divergence pillar (see /research/eurusd-ecb-rate-path-2026-10-20). With no high-impact events on the calendar in the next 30 days, the market will lean on supply technicals and the ECB rate path as the marginal drivers.
What the desk is arguing
The ING credit team's thesis is straightforward: EUR bank bond supply will cruise at €450bn in 2027, down only marginally from the €455bn forecast for 2026, because redemptions—not balance-sheet expansion—are the engine. Per the full note , the authors explicitly state that 'the modest macroeconomic outlook is not expected to push supply up any further,' which is the desk's way of saying this is a refinancing cycle, not a credit-growth cycle.
The supporting evidence is the maturity wall. Nearly €400bn of bank bonds mature in 2027, up €30bn year-on-year and the highest level in a decade. Covered bonds lead at €186bn of redemptions (a historic high), subordinated debt adds €45bn (€31bn Tier 2, €14bn AT1), while senior unsecured redemptions actually fall to €162bn from over €170bn in 2026—a partial offset that keeps the headline number from rising further.
The alternative read the desk is implicitly rejecting would be that heavy supply signals accelerating bank lending or risk appetite. Instead, the ING team frames the €450bn as a passthrough of maturing instruments, which keeps net supply roughly neutral and strips the issuance story of any bullish EUR signal.
Where it sits in our coverage
Our consensus December-26 EUR/USD target is 1.1600, with a range of 1.1000 to 1.2200 across the twelve tracked firms. At the upper bound sit cibc (1.2200) and commerzbank (1.2200), while nomura (1.2000) and rbc (1.2000) also sit above the median. At the lower bound, hsbc (1.1000) and ing (1.1000) are the outliers, with lloyds (1.1200) close behind.
The ING credit note is thematically aligned with the higher-target camp because it describes a stable, non-disruptive European credit backdrop—but note the tension: ING's own FX desk sits at the bottom of the consensus at 1.1000 for December-26, a full 6 cents below the median. That divergence between ING credit (benign supply) and ING FX (bearish EUR) is worth flagging, though the credit team's call does not directly contradict the FX view—it simply removes a potential EUR-positive catalyst from the 2027 outlook.
How other firms see it
On the euro-bullish side, cibc, commerzbank, nomura, and rbc all target 1.2000 or above for December-26, consistent with a benign supply backdrop and a gradual ECB normalization path. On the euro-bearish side, ing, hsbc, and lloyds sit at or below 1.1200, implying they either expect a more aggressive ECB easing cycle or a dollar-supportive Fed path that overwhelms any credit technicals. The middle ground—rabobank, tmgm, investec, mizuho, stanchart, abnamro, and bofa—clusters between 1.1400 and 1.1800, effectively treating bank supply as a neutral input.
Watch the EUR/USD trajectory against the ECB rate path and the broader euro-area credit impulse; the covered-bond redemption wall into 2027 will also intersect with the ECB's collateral framework and any changes to the TLTRO unwind. Related internal context sits in /research/eurusd-ecb-rate-path-2026-10-19 and /research/eurusd-ecb-rate-path-2026-10-18, which track the same consensus-versus-spot divergence.
What the calendar says
No high-impact events are scheduled in the next 30 days for the euro area, so the market will trade the supply technicals and positioning into year-end without a scheduled catalyst to break the range. That void itself is a signal: without a data or central-bank trigger, EUR/USD is likely to respect the 1.1200–1.1300 support band and the 1.1600 consensus ceiling remains a Q1-26 story rather than a Q4-26 one.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING forecasts €450bn of EUR bank bond supply in 2027, just below the €455bn 2026 estimate, driven almost entirely by €400bn of maturities—the highest redemption wall in a decade.
- 02Covered bond redemptions hit a historic high of €186bn, while senior unsecured redemptions fall to €162bn from over €170bn, keeping net supply broadly neutral.
- 03The benign supply picture removes a potential EUR-positive catalyst but does not override the 6-cent gap between ING's own FX desk (1.1000 Dec-26) and the 1.1600 consensus.
- 04With no high-impact euro-area events in the next 30 days, EUR/USD at 1.1253 has no scheduled catalyst to close the gap to consensus in the near term.
Market implications
Watch EUR/USD at the 1.1200 support level and the 1.1300 pivot—a break above 1.1300 without a data catalyst would signal that positioning, not fundamentals, is driving the pair. The covered-bond redemption wall into 2027 may also tighten EUR swap spreads and indirectly support the euro via collateral dynamics, a second-order effect that the consensus 1.1600 target effectively assumes.
Risks to this view
A hawkish ECB surprise—particularly any signal that the TLTRO unwind will be slowed or that collateral scarcity is becoming a policy concern—would push EUR/USD toward the 1.1600 consensus faster than supply technicals imply. Conversely, a sudden deterioration in euro-area bank credit metrics or a disorderly widening of peripheral spreads would validate ING's 1.1000 target and invalidate the benign-supply thesis.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
ING | Bullish | 1.1300 |
UBS | Bullish | 1.1600 |
Société Générale | Bearish | 1.1000 |
Articles Bank bond supply to stay at cruising altitude in 2027 Published 10:17 Credit Financial Institutions Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download We expect EUR bank bond supply to reach €450bn in 2027. Redemptions remain the main driver of the high supply, but the modest macroeconomic outlook is not expected to push supply up any further. We foresee covered bond issuance reaching €185bn, senior unsecured bond supply at €210bn and another €55bn in subordinated bank bonds to be printed Marine Leleux and Jesse Norcross High redemption volumes are expected to keep EUR bank bond supply elevated in 2027 Variables driving next year's bank bond supply We expect EUR bank bond supply to reach €450bn in 2027, down slightly from the €455bn forecast for 2026.
In our view, several variables will be steering next year’s issuance. Redemptions will remain the central driver of the elevated 2027 bank bond supply forecast. Nearly €400bn of bonds mature in 2027, up €30bn year-on-year and the highest level in a decade.
The increase is especially significant in the covered bond segment where €186bn will mature, a historic high. The subordinated segment will also rise, with redemptions totalling €45bn, up about €6bn from 2026. Of this total, €31bn is in Tier 2 instruments and €14bn in AT1s.
The senior unsecured segment will partially offset these increases, with total redemptions reaching more than €162bn, down from more than €170bn recorded this year. The majority stems from senior bail-in bonds (senior non-preferred or senior HoldCo) with more than €90bn and an additional €71bn maturing in senior preferred instruments. Despite diverging trends across segments, elevated redemption volumes remain the main driver of bank issuance in the euro bond primary market, as institutions refinance maturing instruments.
Bank bond redemptions per segment Source: ING "> Source: ING While high redemption levels point to stronger supply in 2027, other factors also play a role, such as the macroeconomic environment. Eurozone GDP growth is forecast to increase slightly in the second half of next year to reach 1.5%, still well below levels seen after the pandemic. Furthermore, our economists pencil in an additional European Central Bank rate hike in 2026, bringing policy rates to 2.75% in early 2027.
The higher interest rate environment is not expected to support lending growth, especially as geopolitical instability remains. As a result, we do not see the modest macroeconomic backdrop acting as a catalyst for bank bond supply in 2027. Policy rates and GDP growth forecasts Source: ING "> Source: ING Asset swap spread levels initially proved very resilient to geopolitical instability and related economic changes this year.
Sources & References
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