Challenges Ahead: Decreased Cash Buffer, Low Reverse Yankee and Corporate Hybrids Supply in 2024

Decreased cash buffer

The significant cash levels on the books of many corporates (due to large funding done in 2019-2021) have been depleted, and thus the buffer is lower. This means refinancing costs could increasingly become a problem in 2024, particularly for high-yield issuers and real estate issuers. This also creates an element of urgency to get funding done. 

Low Reverse Yankee supply expected

Much like this year, we don’t expect Reverse Yankee supply to play a dominant role. Thus, we are not likely to see additional supply pressure coming from US issuers. As elaborated on below, we forecast just €40bn in 2024.

Low Corporate hybrids supply expected

Similarly, looking at Corporate hybrids, we also don’t expect a large level of supply. On the back of still very high refinancing costs, we are forecasting only €15bn in 2024, as detailed below.

Insignificant volume of assets and liabilities management exercises expected

An insignificant volume of assets and liabilities management exercises are expected in 2024, as the current high-yielding environment and wide spread levels leave very little attraction.

Low M&A activity expected

We expect M&A activity will remain at low levels in the first half of the year, and perhaps pick up in the second half of the year.

Small rise in CAPEX is forecasted

CAPEX levels are expected to rise in both EUR and USD IG, as shown below. The rise is indeed marginal but does play a role in the expectation of a small increase in supply. The growth in CAPEX is very much driven by Financials, Energy, Industrials, Utilities and Consumers.

 

Disintermediation trend to remain

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