We look for US funding requirements in terms of gross issuance of $2.239trn in 2014, with net issuance of $0.792trn including FRN supply, and $0.652trn without.
In the euro area, we forecast gross issuance of c.€877bn in 2014, down c.€31bn on 2013. We estimate net issuance in bonds will be €246bn, while we expect bills outstanding to fall c.€5.5bn.
We expect gross issuance in Japan to rise ¥1.8trn to ¥135.2trn in 2014. Redemptions will rise c.¥9.8trn, however, meaning net issuance will fall in JGBs to c.¥35.3trn.
We expect gross issuance in the UK of c.£143.7bn in 2014. We also forecast the UK’s net issuance to fall to c.£75bn in 2014 from c.£98bn in 2013. US agencies’ funding needs should reduce further owing to a drawdown of deferred tax assets as earnings improve and extension of callables. Net issuance could be -$70bn versus -$40bn in 2013, while gross bellwether issuance could stay in the $50bn area.
In covered bonds, we forecast €130bn of gross supply in 2014, while net supply is expected to be €42bn negative (2013: -€46bn). We expect euro area covered bond markets to shrink €57bn, but non-euro area markets to grow by €14bn.
In SSA space, we expect the supply by the European SSA and international supranational issuers in 2014 to reach €360bn. Given total redemptions of about €300bn (2013: €212bn), we expect net supply to reach €60bn (2013: c.€150bn).
In IG Credit, we expect gross, €-denominated investment grade issuance to reach €420bn in 2014, up from an estimated €400bn this year. A more meaningful acceleration seems unlikely, given the regulatory pressure on banks to keep their balance sheets constrained and the need for non-financials to improve their credit metrics. Our forecasts imply a fifth consecutive year of net negative issuance, again driven by financials. In the US, we expect investment grade issuance to be above $1trn for the third consecutive year in 2014, albeit somewhat lower than this year’s record volumes.