Data provided by Dealogic
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
The low rate/yield environment along with a low default rate since 2009 have given confidence to investors to push down the credit curve as corporate bond yields have declined in the investment grade market. The disintermediation trend has been witnessed in this market too, such that HY issuance has averaged almost Eur47bn per year since 2013, with 2014’s record year for issuance of €57bn – finally surpassed in 2018 – and in spectacular style.
MiFID II is HERE
ii) Monthly HY Corporate Bond Issuance
|∑ = 57.12||∑ = 48.55||∑ = 48.98||∑ = 75.02||∑ = 16.67|
|Avg = 4.76||Avg = 4.05||Avg = 4.08||Avg = 6.25||Avg = 1.39|
The stand-out primary market in 2017 was the high yield market. Anyone fretting about the so-called wall of funding that might impact borrower refinancing levels (2018-2020) ought to have their concerns assuaged by the record €75bn of issuance in 2017.
That fantastic level of issuance is high unlikely going to be repeated. Our own view is that while funding costs remain relatively attractive for sub-investment grade rated borrowers, demand is a little weaker with the marginal buyer being IG investor portfolios. We think issuance levels will fall back to the €55-60bn area – which itself will be slightly above the average of the previous few years.
That said, we’ve had €4.97bn of issuance and it has us well ahead of the January issuance seen last year, but we don’t think that the pace of issuance can be sustained.
For fully searchable individual HY deal data, click here.