US Investment Grade_ US exporting supply

Summary of Barclays US Investment Grade Research Call Industry Overview - The focus is on the US Investment Grade (IG) market, particularly the cross-border issuance of reverse Yankee deals in the Euro-denominated IG market [1][2][3]. Key Points 1. Reverse Yankee Issuance: - There has been a notable increase in reverse Yankee issuance, reaching €24 billion year-to-date, marking one of the busiest starts for US issuers in the past 20 years, surpassed only by 2007 and 2020 [2][3]. - This surge is attributed to the attractiveness of the Euro market compared to the US market, driven by yield differentials [11][14]. 2. Overall Market Activity: - Total Euro-denominated IG issuance has reached €151 billion year-to-date, aligning with expectations of increased gross supply to meet elevated redemptions [2]. - In contrast, US dollar-denominated IG issuance is lagging behind last year's pace, with $248 billion issued, which is $100 billion shy of the total supply in January/February 2024 [2][3]. 3. Market Dynamics: - The outright yield differential between US dollar and Euro IG markets is currently around 215 basis points, which is significant and influences funding decisions for issuers [11][14]. - The portion of total US non-financial supply outside the dollar market has increased to 14.2% year-to-date, the highest level since 2019 [11][14]. 4. Issuer Participation: - Major US banks such as JPMorgan Chase, Bank of America, and Goldman Sachs have been active in the Euro market, collectively issuing €7.5 billion [3]. - Notable non-financial issuers include IBM, Johnson & Johnson, and Ford, indicating a broad interest across sectors [3]. 5. Future Outlook: - The report suggests that if the yield differential widens due to inflation and fiscal concerns in the US, more US companies may consider tapping into the Euro primary markets [14]. - Companies with European operations or upcoming Euro-denominated maturities are particularly well-positioned to benefit from this trend [19]. Additional Insights - The research highlights the correlation between yield differentials and reverse Yankee supply, indicating that the current market conditions may lead to sustained interest in Euro-denominated issuance from US companies [14]. - The document also includes a screening of US non-financial issuers with upcoming Euro maturities, identifying potential candidates for future issuance [21]. This summary encapsulates the key insights from the Barclays US Investment Grade research call, focusing on the dynamics of the Euro and US dollar IG markets, issuer activity, and future trends.