Real money will be big sellers of the euro.
Bank of America notes that it's a 'once in a lifetime' opportunity for US corporates to issue debt in euros at rock bottom rates.
"This is an opportunity that many are not willing to miss, as evidenced by the surge in EUR-denominated corporate supply to over €60bn in March, the largest ever monthly amount," they write in a note to clients. "Yankee issuance is set to continue this year as EUR rates remain low during QE, demand from European investors for new names stays strong, and US credit spreads stop tightening as the Fed starts hiking. We expect EUR issuance by US corporates to reach €75-€90bn this year. This should weigh on the EURUSD and widen the basis in the long-end."
They note that nearly half of the euro-denominated corporate debt supply this year has been from non-Eurozone companies with the bulk from the US.
I think they could be underestimating the flows here and it's not just corporates. Mexico launched a 100-year euro-denominated bond this week and it won't be keeping any of the 1.7 billion euros in Europe.
