Last year the new-issue corporate bond market was so buoyant that 2010 can only disappoint. Indeed, January’s optimism has quickly turned to February’s anxiety, as fears over bond market access for Europe’s peripheral sovereign borrowers have prompted a rise in funding costs and a slowdown in issuance.
The continued volatility in credit spreads across the board caused by Greece’s bungled five-year issue in January and questions about whether it will receive financial aid from the European Union has helped contribute to a slowing in corporate issuance. This is despite the fact that Portugal and Spain, two countries closely associated with Greece’s debt problems, managed to issue bonds in February. The concern remains that as banks face a busy year of debt rollovers, funding costs could rise and, much worse, lower-rated corporates might be shut out of the bond markets altogether. European banks have almost €500 billion of debt to refinance this year, according to data from Dealogic.
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"As these sovereigns continue to be stressed, many of their issuing banks are trapped behind them" Spencer Lake, HSBC |
"As these sovereigns continue to be stressed, many of their issuing banks are trapped behind them, and these banks have quite a bit of funding to do," says Spencer Lake, head of debt capital markets and acquisition finance at HSBC in London.