European bond market enters a warm period after the summer, with the weekly bond issuance expected to reach 20 billion euros
This week, the European bond market has seen a revival, with an expected issuance volume of 15 to 20 billion euros. Nearly 40% of market participants have positive expectations about this. Recent market volatility has made it necessary for borrowers to seize the issuance window. Data shows that bond issuance in the last week of August surged significantly, with a 28% year-on-year increase, reaching a historical high. Investors are looking to lock in higher yields before central bank rate cuts, and the market is hopeful for a recovery in debt sales
Zhitong Finance APP noticed that bankers and borrowers are preparing for a rebound in bond sales this week, hoping to reach deals when the market is calm.
Nearly 40% of market participants surveyed expect bond issuance this week to reach between 15 billion euros (16.5 billion US dollars) and 20 billion euros. Data shows that the total amount of new bond issuances in Europe over the past two weeks was only 3.5 billion euros.
Marc Lewell, head of syndicate for J.P. Morgan in Europe, the Middle East, Africa, and Asia-Pacific, said, "The market is gearing up for a post-summer issuance surge. Recent volatility has highlighted issuers' fears and reminded them to take full advantage when the issuance window opens."
Due to market sell-offs triggered by weak US employment data, investment-grade credit risk indicators widened to the highest level of the year in early August, reminding investors that there is still room for negative surprises.
Data shows that bond issuance saw a significant increase in the last week of August, with bond sales for 2022 and 2023 both exceeding 30 billion euros.
Ranking data shows that overall bond issuance in Europe increased by 28% year-on-year, reaching a historical high, thanks to some pre-rate cut bond issuances and borrowers' concerns about volatility.
A report using EPFR data from Bank of America shows that last week, outflows from investment-grade funds were mainly concentrated in the medium and long term, while funds had been flowing in for the previous six weeks.
Before central banks may further cut interest rates, investors will urgently seek to make deals, putting the cash accumulated in the past few weeks to use and locking in higher yields.
Lewell said that assuming investors put cash into money market funds, they wouldn't miss out on much return so far this year. "But the fear of missing out is a driving factor, and many want to catch it before the credit wave recedes."
Bond sales are expected to rebound after the summer