BA/ML analysts eyed the high-grade....>

US CORPORATES: BA/ML analysts eyed the high-grade US$ corporate bond market and

said the "biggest driver of supply is demand, which could actually worsen in the

second half of 2018. Moreover we expect the more structural supply reducers

emanating from tax reform to finally materialize in 2018. Combined with some

frontloading in 2017 that implies we expect a 15% decline in HG supply volumes

in 2018 to $1.13 Trillion."

- They eyed "continued upside risk to volumes as 2018 looks set to begin with

the same favorable excess demand conditions that were the clear drivers of

upside to 2017's record breaking volumes." 

- They believe "these conditions should not improve further and could actually

worsen in the 2H 2018, as the Fed's monthly balance sheet reductions become

really large, and the ECB communicates the end to QE. Moreover, we expect the

more structural supply reducers emanating from tax reform to finally materialize

in 2018. Combined with some frontloading in 2017, that implies we expect a 15%

decline in high grade new issue supply volumes in 2018 to $1.13tr. Due to an

increase in bond maturities, we expect net supply to decline 33% to $487bn."