The US dollar credit market saw a significant surge in October, with a notable increase in corporate issuance. This month's activity has sparked some intriguing discussions among market watchers.
A Robust Corporate Presence
Corporate issuance hit 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-breaking year of 2020.
The issuance was concentrated in longer-term maturities, with the 9-12-year and 17-year+ 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+ range. This highlights a continued preference among corporates to secure long-term funding amidst stable rate expectations.
Tech's Impact on Reverse Yankee Supply
One of the notable deals at the start of November was Alphabet's six-tranche offering totaling €6.5 billion. This move aligns with the trend of numerous tech companies issuing Reverse Yankee bonds in the EUR market in 2025. US issuers benefit from the relatively tight and outperforming EUR spreads compared to USD spreads, providing a cost-saving advantage. 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 continue to be a key driver of this supply.
Financial Supply on the Rise
The financial supply increased for the second month in a row in October, with bank senior issuances growing to $36 billion 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.
An additional $5.5 billion was issued in the capital segment, although this marks a $3 billion drop compared to the previous month. However, it aligns 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 impact of these trends on the broader market and the potential implications for investors. With the market's focus on long-term funding and the growing presence of tech issuers, what does this mean for the future of the US dollar credit supply?
Thoughts? We'd love to hear your insights and predictions in the comments below!
