Record-Breaking January for European Bond Sales, Surpassing €240 Billion in Unprecedented Market Activity
The European bond market has witnessed a remarkable surge in January 2023, with record-breaking sales worth over EUR240 billion ($260 billion). This impressive figure surpasses the previous January record set in 2020, and is just a slight increase from the EUR239 billion recorded three years ago.
The global credit rally has been a significant driving force behind this surge, reducing funding expenses for issuers and increasing business bond returns. Notably, the week of January 13, 2023, was the busiest ever for debt handling in the area, with over EUR100 billion increased in five days.
The week's frenetic activity saw a flurry of issuances from various players, including Deutsche Bank AG and Credit Agricole SA. The UK and European Union also contributed to the record-breaking sales, with a £6 billion ($7.38 billion) UK gilt sale gathering over £65 billion of orders.
The surge in bond sales can be attributed to a combination of factors, including the current market rally and concerns about future bond sales costs. With the European Central Bank's policy rate expected to be significant, issuers are worried that it may become more expensive to sell bonds, especially in the shorter end.
This heightened bond demand is primarily fueled by market expectations of slowing interest rate hikes and recession fears. Investors, including retail investors, U.S. commercial banks, and foreign exchange reserve managers, have been loading into public debt markets throughout the start-of-year global credit rally.
The record European bond sales in January 2023 have also seen notable advances in digital bond issuance in Europe. The European Investment Bank's first-ever digital bond in pound sterling and Siemens' bond issued on blockchain technology are examples of these innovations. These fintech applications might have offered added liquidity and efficiency, but the primary factor remains macroeconomic conditions and investor demand in response to monetary policy expectations.
David Zahn, head of European fixed income at Franklin Templeton, stated that issuers are becoming more cautious about taking advantage of market windows instead of waiting. The eight bond offerings on Tuesday are expected to contribute significantly to the total bond sales for January 2023, which are expected to exceed EUR244 billion once last terms are set on Tuesday's eight offerings.
Franklin Templeton is overweight on European credit, reflecting a positive outlook on the market. Despite the disappointing year 2022 for international credit markets due to central banks' initiatives to combat surging inflation, the current rally offers a promising start to the year.
(Last Updated: 24 January 2023)
[1] Source: Reuters, Bloomberg, Financial Times [2] Source: The Wall Street Journal [3] Source: The Guardian [4] Source: Finextra Research
*Note: The information provided is personal and an individual with expertise of the process asked not to be named.
Businesses and investors alike have been significantly impacted by the rise in the European bond market in January 2023, as record-breaking sales worth over EUR240 billion ($260 billion) have been reported. This surge in bond sales, driven by the global credit rally and concerns about future bond sales costs, has led to an increase in business bond returns and opportunities for personal-finance investments.
