(Bloomberg) — Companies flooded Europe’s bond market at a record pace, rushing to lock in funding as central banks warn the Iran conflict could reignite inflation and force interest rates higher.
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Sales included Airbus SE’s first bond in nearly six years, beer giant Carlsberg Breweries A/S with debut hybrid debt and pharmaceutical company Novartis AG with a three-part deal. Both investment-grade and junk-rated firms joined the frenzy, and in total 17 corporate borrowers offered 24 tranches — each a record, according to data compiled by Bloomberg.
“Credit spreads remain near historic tights given the rate environment,” said James Cunniffe, HSBC Holdings Plc’s head of corporate and structured debt capital markets syndicate for Europe. “Investors are well positioned to take down anticipated supply, with May being one of the busiest months of the year.”
The flurry of sales during a traditionally active month came on a day when global bonds rallied and gauges of credit risk slid on optimism that the US and Iran are nearing a peace deal. The iTraxx Europe index of investment grade credit default swaps fell to the lowest since April 17, while the equivalent index for junk-rated firms hit a near two-month low.
By tapping a buoyant market after quarterly earnings, firms can shore up balance sheets and lock in new debt to tackle maturities coming due.
Overall, including financial firms and sovereign players as well as companies, a total of 34 borrowers were in the primary market with 43 tranches of new bonds being sold, also a record. That amounted to about €31 billion ($36.4 billion) set to price, according to data compiled by Bloomberg.
Limited Window
Investor demand was strong enough to encourage a wide range of junk-rated issuers — including chemicals firm Ineos, housing company DomusVi and telecoms provider Telekom Srbija — to take part in the rush for deals.
Selling now avoids the risk that credit’s rally could potentially evaporate if the war drags on, given consumers would start to feel the fallout from higher prices and resurgent inflation may lead central banks to start hiking rates next month.
Borrowers are also taking advantage of a constrained window for sales this month, given public holidays in various countries across Europe. The UK was closed on Monday, while France will be shut on Friday and then Ascension Day on May 14 will also stop trading in some markets.