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
Email a colleague
Request a PDF

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
  • 13 Mar 2017
1 JPMorgan 94,925.33 384 8.39%
2 Citi 87,531.58 331 7.74%
3 Bank of America Merrill Lynch 84,341.49 288 7.46%
4 Barclays 75,288.19 241 6.66%
5 Goldman Sachs 68,504.71 208 6.06%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 16 May 2017
1 Deutsche Bank 19,381.65 47 8.82%
2 Bank of America Merrill Lynch 18,968.25 36 8.63%
3 HSBC 18,103.95 50 8.24%
4 BNP Paribas 8,911.57 55 4.05%
5 SG Corporate & Investment Banking 8,885.00 54 4.04%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 23 May 2017
1 JPMorgan 8,714.26 35 8.36%
2 UBS 8,283.47 33 7.95%
3 Goldman Sachs 7,736.57 37 7.42%
4 Citi 6,897.11 46 6.62%
5 Bank of America Merrill Lynch 6,215.31 24 5.96%