Category Archives for "Corporate Bond Issuance"

31st October 2017

We can never get enough

MARKET CLOSE:
iTraxx Main

50.0bp, -0.6bp

iTraxx X-Over

225.2bp, -3bp

10 Yr Bund

0.37%, unchanged

iBoxx Corp IG

B+97.7bp, -1.5bp

iBoxx Corp HY

B+259.2bp, -2.5bp

10 Yr US T-Bond

2.37%, unchanged

FTSE 100

,
DAX

,
S&P 500

,

And we can go on…

IG credit for the year to date has returned a superlative 2.8% with returns accelerating over the past two months as rate markets blink and credit spreads tighten into a brightening and anticipatory macro environment. The hunt for yield, buying the kind of risk we think is going to be ‘just fine’ into the financial markets recovery – and which allows us to take advantage of the cheap deals on offer – has made sure that the contingent convertible market has been the year’s most successful area of the corporate bond market. CoCo index returns are at 17% year to date and many will have made 20% or more on their holdings, so far. High yield markets are up 6.6% in the year to end of October. We’re willing the year to end now! And don’t forget, spreads are in record territory for almost all corporate markets and just 5bp away (at B+99bp) for the IG market.

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29th October 2017

Show me the money

MARKET CLOSE:
iTraxx Main

51.4bp, -1.4bp

iTraxx X-Over

232.6bp, -4.5bp

10 Yr Bund

0.39%, -4bp

iBoxx Corp IG

B+100.7bp, -1bp

iBoxx Corp HY

B+264.5bp, +1bp

10 Yr US T-Bond

2.42%, -4bp

FTSE 100

,
DAX

,
S&P 500

,

Powering on…

There are just two sessions to go before we close out a super October for the higher-yielding end of the corporate bond market. The Markit iBoxx HY cash index has tightened by 18bp, the CoCo index by 49bp and even the non-financial hybrid index (already extremely rich) is 24bp tighter in the month so far. They’re all at record tight levels for the respective indices.

The better economic backdrop is the driver as it has helped sustain equities at – or even pushed them to setting – record levels. That confidence has filtered through to other risk assets and especially ones more closely correlated with equities. And all that even as the tightening cycle is underway, but because it is so much in its infancy, the credit markets will continue to trade as the ‘go to’ product for yield hungry investors. Monthly and year-to-date excellent total return performance will only serve to suck in more funds to an asset class where, in 2018, ought in no way deliver the kind of performance it has in a stunning 2017.

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3rd January 2016

High Yield Corporate Bond Issuance

Data provided by Dealogic & Credit Market Daily

The bar graphs below illustrate the trend in the growth and trends in corporate bond issuance in the euro-denominated bond market.

i) HY Corporate Bond Issuance Since 2003

We might have had zero issuance in high yield in December and just €1.8bn in November, but we still managed €62bn for the full year in 2018. Coming home on the heels of that record supply in 2017 of €75bn, the year was a good one nevertheless. So as we head into 2019, our view is that we will see just €45bn of deals in the high yield market. That’s back to the pre-ECB QE non-manipulated level. It won’t bring too many problems in a refinancing aspect, because the wall of funding has been pushed back a few years.


MiFID II is HERE


 

ii) Monthly HY Corporate Bond Issuance

The poorer level of deal flow, seen pretty much since the end of the first quarter, has continued into 2019 for the high yield market. It’s not great. We’ve had €10.5bn of issuance with March’s €4.8bn the best month for deals since September last year. There has been some concern around economic weakness and all that holds for the high yield market in terms of performance and default rates and the like.

The key takeaway from the last decade has been that low funding rates and investor demand (forced or otherwise) has managed to help borrowers roll over maturing obligations, removed the immediate worries about potential walls of funding and kept the sector ticking over. The bar for all of these variables has risen we would think, but returns of around 5% in the opening quarter will have helped confidence.

For the full-year, we are looking in terms of €40bn tops for issuance though which would be well-down on the range we have seen in the 2014-2018 period (€48bn – €75bn).

For fully searchable individual HY deal data, click here.


 

More Charts: Investment Grade Issuance | Senior Financials Issuance

3rd January 2016

Investment Grade Corporate Bond Issuance

Data provided by Dealogic & CreditMarketDaily.com

The bar graphs below illustrate the trend in the growth and trends in issuance in the euro-denominated corporate bond market.

i) Investment Grade Corporate Issuance Since 2003

The financial crisis has ultimately been seen to have helped promote the corporate bond market as a major financial asset class. Zero policy rates and subsequent low bond yields have seen funds shift into the corporate bond market as investors search for ‘safe’ higher yielding assets. Corporate bonds have been the chief beneficiary and the huge disintermediation in funding for the corporate sector has enabled the euro-denominated corporate bond market to grow in size from just Eur700bn in 2007 to over Eur2trn now.


MiFID II is HERE


 

IG Deals

Go

IG Fund Ratings

Go

IG Spreads

Go

 


 

ii)  Monthly Investment Grade Corporate Issuance

 

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iii) US Corporate Borrowers as a % of Total Euro IG Issuance

A big theme in 2015-16 was the amount US-domiciled corporates funded in the euro-denominated debt markets. As shown in the chart above, it was a record 26% of the total volume in 2015 and 22% in 2016. Low rates everywhere, but lower in Europe along with low spreads made it attractive for US corporates to borrow in euros (even when swapped back to dollars).

That dropped to 16% in 2017, and that is close to the long-term average. For 2018, we dropped back to 12% of US domiciled borrowers accessing the debt capital markets here. For the opening quarter of 2019, we at the figure stands way in excess of 20%.


 

More Charts: High Yield Issuance | Senior Financials Issuance

31st December 2015

Senior Financials Corporate Bond Issuance

Data provided by Dealogic

The bar graphs below illustrate the trend in the growth and trends in issuance in the euro-denominated corporate bond market.

i) Senior Financials Issuance Since 2003

The all singing, all dancing days of senior issuance pre-financial crisis – are over. Admittedly, back then a fair portion of the supply was front-end in terms of maturity and league table motivated, but we have seen a material decline in senior issuance levels. The banking sector, quite simply, doesn’t need the money.

The difficult macro outlook had made banks more wary of lending but conditions and the outlook are less strained now. Nevertheless, we think we will only see issuance at around the average level established over the past few years, while senior non-proffered deals – as TLAC considerations become firmly entrenched – will be main senior funding structure now on.


MiFID II is HERE


ii) Senior Financials Monthly Supply

 

The senior financials sector has had a good quarter – as it usually does, but at €43bn of issuance, we’re looking at around the €130bn level for the full-year. Again, that is way in excess of our earlier expectations, but activity has been very good in this opening period with €17.5bn issued in January, €15bn in February and a touch over €10bn in March.

 

More Charts: Investment Grade Issuance | High Yield Issuance