Thursday, November 12, 2015

US corporate debt inventories turning negative – Deutsche Bank

FXStreet (Delhi) – Jim Reid, Research Analyst at Deutsche Bank, notes that the latest data from the NY Fed showed that the US corporate debt inventories‎ turning negative for the first time on record.

Key Quotes

“Rather like the fact that swap spreads are now deeply negative in the US, this again shows the relationships and ideas we knew from the past are changing in this heavily regulated market and financially repressed world. In both markets year-end pressures are exacerbating the issue.”

“We still believe that when this credit cycle ends the lack of liquidity will be a major issue but for now other factors are still more dominant for the direction of spreads and we don't think there has been an increase in the liquidity premium in recent times. In fact with inventories run down so quickly, and with the inflows we've s‎een in recent weeks, had it not been for still huge US supply, credit could have gapped tighter. At the moment supply is offsetting positive inflows and remains a big issue for US credit.”

“However in some ways it does reflect that there is still demand for the asset class. The worst periods in credit markets are when you can't give new deals away. At the moment record supply is being taken down which is causing spread indigestion rather than anything more serious at the moment.”

“Trying to gauge the volume of supply in US that we’ve seen and post Tuesday’s c.$7bn of issuance, we’re standing now at nearly $57bn alone for the month of November so far and $1.4tn YTD. Putting it into perspective, that’s currently running about 17% higher YoY.”
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