2024 Credit Supply Outlook: Mixed Forecasts Across EUR Corporates, ESG, and More

Credit Supply Outlook: The Collection

Credit supply forecasts are mixed for 2024. We expect higher supply in EUR corporates and financials, ESG supply, high yield and Real estate supply. However, we forecast lower Reverse Yankee supply, corporate hybrid supply and covered bond supply. Meanwhile, USD corporate supply should remain stable.

 

We forecast €310bn in EUR corporate supply in 2024

We are forecasting a minor increase in corporate supply in 2024, but overall low supply. The main driver of this increase is the rise in redemptions from €246bn up to €260bn. Thus, net supply remains low at just €50bn. The technical picture, therefore, remains strong.

 

Net supply remains low in 2024

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Why we expect a small increase in supply but overall low supply:

Higher for longer rates

Rates are likely to stay at these elevated levels for some time and come down slowly. Our rates strategists expect EUR rates to move mostly sideways in the coming year, with EUR 10-year swap rates only dipping towards 3% by the middle of next year from around 3.25% currently. As such, funding costs remain very high. However, in saying that there has been a strong preference for issuers to hold off new issuance until next year in an attempt to get cheaper funding with the expectation of rates falling.

 

Less availability of credit and equity

With tighter lending standards, less available bank liquidity and banks looking to reduce exposure to risk, many corporates will be pushed towards the bond market. This adds some additional supply pressure, particularly in certain segments of the market. Additionally, there is now a lack of access to IPOs, LBOs and private equity, further putting pressure on corporates' ability to refinance. 

 

Expect disintermediation trend to remain

We expect a small increase in supply due to the continuing disintermediation trend. As shown in the chart below, there has been a trend of more disintermediation over the past ten years. 2023 is likely to function like 2012 and 2016 when supply increased following a year of low bond supply relative to loan supply (ratio of loans-to-bonds in 2012, 2016 and 2022 all increased, breaking the disintermediation trend due to market volatility but rebounded the subsequent year).