Dollar Decline Could Actually Narrow Corporate Spreads

Despite a recent back up in Treasury yields on speculation the dollar's fall will spook foreign investors, a weaker greenback may actually bode well for corporate spreads in the long term, according to credit strategists.

  • 03 Dec 2004
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Despite a recent back up in Treasury yields on speculation the dollar's fall will spook foreign investors, a weaker greenback may actually bode well for corporate spreads in the long term, according to credit strategists. They argue a weaker dollar could boost exports and increase creditworthiness among U.S. corporates, in a fundamental long-term trend that should more than offset any drop in demand from foreign buyers.

Kamalesh Rao, economist at Moody's Investors Service, said further weakness of the dollar to $1.40 to the euro could force foreign investors to rethink their investments; the dollar was at $1.33 on Dec. 1. But the lower dollar could ultimately boost corporate balance sheets. "With another 5-10% drop in the dollar, spreads may tighten another five basis points," he said, noting the weaker exchange rate will help U.S. exports.

The dollar's recent freefall comes at a time when foreign demand for corporate bonds is at its strongest ever. Foreign investors bought more than $44 billion of U.S. corporate bonds in September, the highest net monthly purchase ever recorded, according to data from the Treasury. There is no accurate historical precedent to gauge how the dollar's decline will impact foreign investment in corporate bonds because foreign investors have a larger role in the U.S. market than they have ever had.

  • 03 Dec 2004

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 358,291.38 1348 9.06%
2 JPMorgan 320,704.66 1461 8.11%
3 Bank of America Merrill Lynch 318,128.31 1104 8.04%
4 Goldman Sachs 236,643.87 789 5.98%
5 Barclays 231,197.41 895 5.84%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 35,007.57 165 6.53%
2 Deutsche Bank 34,880.53 120 6.51%
3 Bank of America Merrill Lynch 31,805.65 97 5.93%
4 BNP Paribas 27,920.60 169 5.21%
5 SG Corporate & Investment Banking 24,398.89 138 4.55%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 19,745.92 80 8.85%
2 Morgan Stanley 16,334.63 83 7.32%
3 Citi 15,972.34 95 7.16%
4 UBS 15,487.17 60 6.94%
5 Goldman Sachs 14,053.61 76 6.30%