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
In the high yield market we think the final total in 2020 will be close to the 2019 total, or even in excess of it, thus possibly seeing a new record. As we closed out 2019, we are just about at the record level of issuance seen for any year since 2017’s €75bn, with €76bn issued. In addition next year, there is a funding wall that needs to be refinanced and might take the 2020 issuance level to between €75bn – €80bn.
There are also going to be higher levels of demand for HY product from ‘IG investors’ frustratingly forced down the curve, squeezed in their market by the ECB’s QE purchases. Macro (as ever) will matter and we will need market volatility to play ball as the market in Europe has a habit of completely closing in periods of stress.
MiFID II is HERE
ii) Monthly HY Corporate Bond Issuance
|∑ = 57.12||∑ = 48.55||∑ = 48.98||∑ = 75.02||∑ = 62.19||∑ = 76.32|
|Avg = 4.76||Avg = 4.05||Avg = 4.08||Avg = 6.25||Avg = 5.18||Avg = 6.36|
Right now, the US economy is holding up relatively well, with Q3 GDP exceeding expectations at 2.1%. We might get a trade deal to evolve further – in due course, past the ‘phase one’ deal. The ECB will be a nuisance for IG investors however, sucking up additional liquidity through their participation in the IG – much as they did in the 2016-2018 period. That could bode well for the high yield market.
So if the US economy doesn’t fall off a cliff (in an election year), underlying market yields stay at around these levels and importantly, the default rate in Europe holds steady at around the 2-2.5% level, then we could be looking at a high level of issuance for 2020. That is, potentially, another record year is on the cards.
For fully searchable individual HY deal data, click here.