“It was a 10-year covered bond from a small German building society, Bausparkasse. Probably too local to be representative, but it is certainly not positive news,” explain Santander analysts, who foresee a sharp reduction in bond issues in the second half of the year, after a record first half. As of last Friday, 16 June, €534 billion had been issued.
Santander’s full year projections point to total issuance of €895bn (+12%) for the full year 2023. Looking ahead to 2H23, they therefore expect a significant slowdown in issuance. “In the financial world to €200mm vs. €340mm in 1H23, so that the overall balance in 2023 will be +10% growth in issuance to c.€540mm and very positive net issuance of +€155mm (vs. +€133mm in 2022 and +€39mm in 2021).”
“In the corporate world, we expect a rebound in 2023 emissions of +14% year-on-year to €355mm. Here with one part of the growth masked by a very favourable comparable base after the 2022 corporate drought (€311mm, lows since 2012). But another, favoured by a progressively higher disintermediation over the coming quarters in view of the sharp tightening of bank funding conditions”.
“In any case, we do not believe we will return to previous years’ levels of €445mm (average in 2016-21) given the timing of the cycle, the better financial situation in the corporate world and the obviously limited interest in M&A deals. In HY debt, we anticipate: i) gross issuance doubling from 2022 (€50mm vs €24mm in 2022) but well below the €125mm in 2021; and ii) negative net issuance for the second year in a row,” they conclude.
