Five Charts to Explain Record-Breaking Bond Sales in Europe

(Bloomberg) — January 2024 was a record-beating month for Europe’s primary bond market, with borrowers selling more than €350 billion in new debt and investors bidding more than €1.86 trillion.

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Here are five charts that sum up the month:

The share of public sector issuance, particularly from sovereigns, was staggering at 55% of the January total sold by so-called SSAs, according to data compiled by Bloomberg. Issuance from the sector is up by more than 50% compared to last year.

Italy, Spain, France and Germany led the way with the largest sized deals. This could decelerate in February however, after the “heavy syndicated supply in January,” Barclays Plc strategists wrote.

Bumper issuance was supported by seemingly insatiable demand. Investors are piling into government bonds to secure current yields levels before the world’s major central banks start to roll back the aggressive monetary tightening of the past years. The ECB is expected to cut rates by as much as 1.5 percentage point this year, with a first quarter-point move in April.

Even Greece, in its first new bond sale since returning to investment grade at Fitch Ratings and S&P Global Ratings late last year, pulled in record orders of more than €35 billion.

Read more: Greek, German Bonds Get Record Bids Amid Rush to Lock In Yields

For corporates and financials, longer-dated debt was the stand-out option. Deals maturing in 10 years or longer received the best cover ratio of any tenor range, the data shows, reflecting conviction that rate cuts from central banks will be extensive this year.

Read more: Higher-for-Longer Yields Are the Star Attraction in Bond Deluge

Story continues

January is typically a slower month for corporates as many firms enter blackout periods ahead of earnings publications. Firms that missed the boat last month will be hoping for similar conditions to continue after the reporting season. So far risk appetite has held up well despite the numerous headwinds faced by the market.

Gauges of investment grade corporate and financial credit risk are at some of the lowest in nearly two years.

It’s not just macro headwinds that investors will be focused on now. Bad news this week from banks including New York Community Bancorp and Japan’s Aozora Bank Ltd. are causing investor jitters, while the fast and furious rally that has gripped markets since the end of last year has squeezed value out of the market.

For Bank of America strategists Barnaby Martin and Ioannis Angelekis, the tightening has been such that it has reached “levels that typically mark exhaustion points for a rally.”

Read more: Credit Market’s Pivot Party Is Coming to An End, Two Banks Warn

NOTE: Issuance volume data covers syndicated EUR, GBP and USD Reg S (euro-dollar) denominated bonds sold in Europe with a maturity of at least 1.5Y and a minimum issue amount of €100m

–With assistance from Paul Cohen.

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