The US dollar credit market saw a significant surge in October, with a notable increase in corporate issuance. This month's activity has sparked interest and raised questions among market observers.
A Robust Corporate Presence
Corporate issuance reached an impressive $98 billion in October, a slight dip from September's $119 billion but still a robust figure compared to previous years. This month's issuance is the third-largest in 2025, trailing only March and September. Year-to-date (YTD), corporate issuance has surpassed $790 billion, outpacing 2024's YTD figure of $753 billion and falling just short of the record year of 2020.
The issuance was concentrated in longer-term maturities, with the 9-12-year and 17-year-plus buckets accounting for the majority of October's supply. Specifically, corporates issued $19.2 billion in the 9-12-year range and a substantial $48.4 billion in the 17-year-plus range, indicating a continued preference for securing long-term funding amidst stable rate expectations.
Tech's Dominance in Reverse Yankee Supply
Among the new deals at the start of November was Alphabet's significant six-tranche deal totaling €6.5 billion. This move aligns with the trend of numerous Tech issuers bringing Reverse Yankee bonds to the EUR market in 2025. US issuers benefit from cost savings due to the relatively tight and outperforming EUR spreads compared to USD spreads. As of now, Reverse Yankee supply for 2025 YTD stands at €64 billion (before today's deals).
Looking ahead to 2026, we anticipate a similar picture, forecasting Reverse Yankee supply to reach €80 billion. We expect USD spreads to continue underperforming, while the cross-currency basis swap is likely to remain anchored around these negative low single-digit levels. Tech issuers financing AI and cloud infrastructure developments will remain a key driver of this supply.
Financial Supply on the Rise
The financial supply increased for the second consecutive month in October, with bank senior issuances growing to $36 billion issued last month, an increase of $8 billion compared to September. With redemptions expected to remain high this month, we anticipate the primary market to stay active in November.
Additionally, $5.5 billion was issued in the capital segment, marking a $3 billion drop compared to the previous month but aligning with the amount recorded in October 2024.
The most significant increase was in the finance segment, where issuances more than doubled in October compared to the previous month, with $34 billion issued.
And this is the part most people miss... The concentration of issuance in longer maturities and the dominance of Tech issuers in Reverse Yankee supply could have significant implications for the market's stability and future trends.
What are your thoughts on these developments? Do you think these trends will continue, and what impact might they have on the market? Feel free to share your insights and opinions in the comments below!
