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
  • Today
1 Citi 253,106.92 930 8.89%
2 JPMorgan 230,914.50 1036 8.11%
3 Bank of America Merrill Lynch 221,389.46 762 7.78%
4 Goldman Sachs 171,499.26 554 6.03%
5 Barclays 169,046.60 646 5.94%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 25,935.16 104 7.16%
2 Deutsche Bank 25,125.19 81 6.94%
3 Bank of America Merrill Lynch 22,023.57 59 6.08%
4 BNP Paribas 19,315.94 110 5.34%
5 Credit Agricole CIB 18,706.93 106 5.17%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Jul 2017
1 JPMorgan 12,578.87 55 8.17%
2 Citi 11,338.07 71 7.36%
3 UBS 10,682.06 44 6.93%
4 Goldman Sachs 10,419.53 53 6.76%
5 Morgan Stanley 10,194.88 57 6.62%