Supply of credit in euros: drop in supply from companies; increase in the financial offer in 2022 | Reporting


Substantial business offer in week 2, driven by Real Estate

The supply from companies amounted to €36 billion in January, to start the year. This was mainly driven by the substantial level of supply coming in week 2, a total of €20 billion. This has been accompanied by an increase in ECB activity, helping to dampen the supply-side indigestion-induced enlargement. The real estate sector was very remarkable in January, with 13 billion euros in supply. On the back of heavy supply in real estate last year and again last month, demand is starting to drop slightly, with the PIN expected to be significant up to 25-30 basis points, significantly higher than the other sectors.

We expect supply to decline this year to around €290bn due to recent pre-funding, high levels of cash on the balance sheet, less need for rating defense in hybrids, issuances strong loans, manageable mergers and acquisitions and unattractive financing opportunities. for foreign issuers. Already, redemptions were higher in 2021, driving net supply down to €122 billion, which contributed to the strong technical picture seen in 2021. redemptions are higher again in 2022, at 223 Billions of Euro’s. As a result, we expect net supply to halve from the 2021 figure, to around €67 billion, a 10-year low.

We expect supply to be concentrated in the belly of the curve in 2022. The long end will become unattractive due to rising and steepening rates, and so issuers will be belly tilted. This can sometimes cause some supply indigestion, but ultimately we remain constructive and favor the short end of the curve.

The financial offer is expected to increase and reach up to 290 billion euros in 2022

The offer of financial services amounted to 34 billion euros in January, including 24 billion euros of banking offer. Covered bonds started the year very well with a supply of 29 billion euros, double the amount of last year. Absent further easing of TLTRO conditions, we expect financial supply to increase in 2022 compared to last year. However, we believe that the supply of bank bonds will continue to be limited by the TLTRO-III program, as the program offers banks funding until the end of 2024.

We expect financial supply to increase to €290 billion this year. The increase is due in particular to the increase in senior unsecured debt issues. We expect covered bond supply to reach €110 billion in 2022.

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