Global Supply Annual: 2014 Outlook

2014 Outlook

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.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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