Companies are issuing Eurobonds at record-breaking volumes, with no sign of slowing down anytime soon.
The ultimate low interest environment combined with deep investor demand and the re-emergence of the ECB’s bond purchase programme have created an optimal backdrop for companies to issue debt.
“The market is undoubtedly 10 out of 10 at the moment”, says Dan Margolin, who heads Nordea’s Corporate Eurobond Origination team.
Corporate Eurobonds typically refer to the largest benchmark bond deals by corporate issuers. Big (and liquid) is often beautiful in the eyes of the bond investor universe, and the largest transactions tend to capture the full attention of the market.
The issuance of corporate Eurobonds has significantly increased over the last few years, and the volume in 2019 is already exceeding the previous record of 2017. The investment-grade Eurobond volume year-to-date is at around EUR 300 billion, the highest volume on record, and Nordic issuance is also at all-time highs.
“The market outlook and pipeline look promising for the remainder of 2019 and early 2020”, says Margolin.
On a structural growth path
In addition to record-low coupons, several other factors make corporate bond markets attractive for issuers. Maturities in the bond market typically extend beyond mid maturities, with 7-10y being the most common among investment-grade issuers for the moment. Diversification of funding sources reduces dependence on bank lending and provides access to a wide investor universe. In general, the bond market also offers quick access to a large amount of capital with terms that can be tailored to issuers’ needs.
In the investment-grade space, issuance by corporates is growing across the credit spectrum, and the largest growth is in the BBB space. The corporate Eurobond market is on a structural growth path, with an overall compound annual growth rate of around 11 percent during the past few years, explains Margolin. This year BBB-rated corporate issuance is up by almost 70 percent.
“We also follow new issue premiums very closely as a general indication of the strength of the market, and we are currently seeing those concessions as low as five basis points or even less”, he adds.
Large, liquid corporate Eurobonds is a cornerstone investment for international and Nordic institutional investors. Nordea’s unrivalled presence in this market amplifies our relevance to such investors and adds to our business opportunity with them, says Povl Bak-Jensen, Head of Syndicate at Nordea. These relationships help us further grow the market by opening up to new issuers, he adds.
In line with the broader market development, corporate issuers in the Nordics are increasingly relying on primary corporate bond markets as a source of financing. Nordea has built a broad platform to help clients across the Nordics access the bond market, says Antti Saha, head of Nordea’s Debt Capital Markets. Nordea has a dominant position as an arranger of Eurobonds in the Nordic region and is the largest arranger on primary bond transactions in the region overall.
“We are proud and humble to have been able to help a prestigious selection of issuers with their Eurobond transactions in 2019”, says Saha.
Nordic Corporate Eurobond League Table 2019
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