Henry Frankenstein: “Look! It’s moving. It’s alive. It’s alive… It’s alive, it’s moving, it’s alive, it’s alive, it’s alive, it’s alive, IT’S ALIVE!”*
The bond market enjoyed a record breaking year in 2019 in terms of the quantum of bonds issued globally. And following a brief hiatus over the festive period, issuance in the first week of 2020 saw bond markets resurrected with a monstrous amount of supply.
Investment grade supply in euros was at its highest level since March 2016, with €31.3bn of deals pricing. The overwhelming bulk of this was squeezed into four days, with Monday considered a holiday in some parts of Europe. Including all issuers (i.e. including covered bonds, sovereigns, supranationals and Agency bonds, etc.) euro supply for the week was a whopping, and record breaking, €79bn.
In US dollars, while not a record breaking week, it was not far off! Last week was the fourth busiest week ever by volume and by number of deals, as 41 companies pumped out $61.9bn of new bond supply.
Closer to home, the absolute numbers in the sterling market were smaller, but we saw several senior bond deals from UK and international banking names. This was enough to expand the senior financial market size by nearly 5%!
Elevated periods of issuance are sometimes treated with a degree of trepidation by bond investors, who are prone to fret about the difficulty in digesting said supply. In this case, however, we saw healthy demand, well covered deals and broadly strong initial performance, suggesting cash remains for attractive issues.
As one would expect, there were opportunities among the weight of issuance, and we selectively participated in these across our fund range.
* Quote from the movie: ‘Frankenstein’ (1931)