Eurobonds: The joys of the new Euromarket

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Eurobonds: The joys of the new Euromarket

After so many months of nervous promises that the euro would herald a new era of bond issuance and credit awareness, bankers can hardly believe it. Volumes in the first quarter have been huge. Europe's investors are forsaking the safety of government bonds and placing big orders for corporate paper. In this new market everything is up for grabs. Market practices are ill-defined, pricing is uncertain and the league table results are wide open. Peter Lee reports.

Europe's new currency might have had a stinking debut on the foreign exchange markets, falling by nearly 10% against the dollar in the first two months, but participants in the Eurobond market couldn't care less. For Eurobond market firms, life has rarely been sweeter. The launch of the euro has brought in its wake a bull market: a boom in new issues and an opening up of the market both to new borrowers and new investors.

In the first two months of this year, the euro rose to prominence, accounting for 49% of international market new issues, compared with 41% for the Emu 11 currencies during 1998. Meanwhile dollar deals accounted for 35% of new issues in the first two months, compared with 38% in 1998. There were some €15 billion of corporate deals in the first two months of 1999, compared with under €4 billion in the same period in 1998. And deals are getting larger. Almost 23% of new issues in the first two months were for amounts of €2billion equivalent or more, compared with 7% in 1997. "Dm1 billion [$550 million] deals used to be considered large. Now €1 billion deals are run of the mill.

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