Europe’s debt market is enjoying its busiest week ever, with borrowers issuing €99 billion ($107 billion) in just four days as they seize on a start-of-year rally to bring deals early.
(Bloomberg) — Europe’s debt market is enjoying its busiest week ever, with borrowers issuing €99 billion ($107 billion) in just four days as they seize on a start-of-year rally to bring deals early.
Italy, Pirelli & C SpA and Deutsche Bank AG are among more than 80 borrowers to raise funds this week, according to data compiled by Bloomberg. The sales haul beats a previous record of more than €98 billion raised a year ago, when firms clamored to get ahead of rising interest rates.
“Some deals have been waiting on the sidelines and it is also just a very good window for issuance with the market willing to absorb new transactions,” said Mark Naur, a strategist at Danske Bank A/S, who said the market could get a further boost following Thursday’s US CPI print, which continued to slow, reducing pressure for aggressive rate hikes from the Federal Reserve.
The bond boom follows a dismal 2022 when extended periods of volatility plagued Europe’s credit market, as investors sought to adjust to multiple rate hikes, spiraling inflation and the prospect of a euro-area recession. But the tide is now turning, with an attractive buying opportunity opening up following last year’s plunge in bond prices and stellar returns expected across global credit this year, according to banks like Bank of America Corp. and UBS Group AG.
“Our sense is that the balance of global risks is starting to shift away from our region,” JPMorgan Chase & Co strategists led by Matthew Bailey wrote in a note to clients this week.
That bullish sentiment is evident in Europe’s issuance market, with banks, in particular, rushing to lock in funds likely in part because they shortly have to make further repayments of ultra-cheap European Central Bank loans. Lenders Banco Santander SA, Natwest Markets, ABN Amro and Societe Generale are among a raft of banks that have raised more than €82 billion euros already this year, a level nearly matching the €85 billion of issuance from the sector in the whole of January 2022, Bloomberg data show.
Banks’ senior issuance has “already reached levels that were printed during the whole of January last year,” ING Groep NV strategist Suvi Platerink Kosonen wrote in a January 11 note. “January was the busiest primary month last year for bank debt and this year is well on the course to repeat history.”
Looking ahead, and it could be the turn of non-financial corporates to step up the pace of debt sales around their seasonal earnings blackout periods, especially if measures of their credit risk continue to ease.
“The current backdrop and demand from investors provides corporate issuers with a broad range of options to get their funding in,” said Paula Weisshuber, head of EMEA corporate debt capital markets at Bank of America Corp. “Despite blackouts approaching this is likely going to continue to spark discussions at issuers to accelerate their funding plans as the question remains if we may see some sort of correction in light of the persisting macro headwinds.”
–With assistance from Ronan Martin, Paul Cohen, Colin Keatinge, Olga Voitova and Neil Callanan.
(Updates US CPI print in third paragraph)
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