Investor demand is strong, and European countries have set off another bond issuance boom.
On February 4, ** reported that eurozone countries issued a total of 200 billion euros (about 214.6 billion US dollars) in January, a record high for the same period in history, up 20% year-on-year.
According to the analysis, on the one hand, in the context of the expectation that the world's major central banks will start a cycle of interest rate cuts, the high yield of European bonds is regaining the favor of investors, on the other hand, the current borrowing costs have fallen sharply, and the bond issuance environment is more favorable.
Andres Sanchez Balcazar, head of bonds at Pictet Asset Management, commented that despite widespread concerns at the end of last year that the European market bond glut would become a problem that cannot be ignored this year, in fact, the record bond ** in January was still well absorbed by the market
I think this means that despite the large amount of bond issuance, the market demand is still strong enough that there is no negative impact of the glut.Rohan Khanna, head of eurozone interest rate strategy at Barclays, said the market showed quite strong interest in European** haired government bonds, largely because of their different views on the macroeconomic outlook in Europe. Investors want to buy ** bonds to lock in higher yields before interest rate cuts.
Some analysts believe that the energy boom has cooled inflation in the eurozone and maintained business activity, increasing Europe's hopes of avoiding a recession.
Mohit Kumar, a strategist at Jefferies, said the high yields on European government bonds "attracted investors who have stayed away from Treasuries for years", while there was also a lot of cash waiting to be deployed in the money market**.
According to the data, in January this year, Europe** and enterprises issued a total of more than 350 billion euros of new bonds, and the scale of investors participating in the bidding reached 186 trillion euros.
Public sector bonds, including sovereign bonds, accounted for 55% of new issuance, and issuance increased by more than 50% year-on-year. Among them, Italy, Spain, France and Germany are the top four in terms of bond issuance. Greece** also issued its first bond since the reinstatement of investment grade ratings, garnering a record investor bid of more than €35 billion.
British bank NatWest estimates that the 10 largest countries in the eurozone will issue about 12 trillion euros in bonds, about the same level as last year. But the bank expects thatNet issuance this year (including the impact of quantitative tightening, excluding the refinancing of existing bonds) will reach 640 billion euros.
NatWest arguesUK bond issuance in 2024 will be the second-highest on record, behind the pandemic 2020, and net issuance is expected to be around three times the average of the past decade.
Italian insurer Generali expects net issuance in European countries** to reach 680 billion euros this year, 7% higher than in 2023, and "fatigue" may appear.
According to the International Monetary Fund (IMF), as countries have stepped up borrowing to fund economic stimulus packages, health care and pensions for the aging population during the pandemic, public debt in advanced economies has soared from about 75% of GDP two decades ago to more than 112%, and it is difficult to determine the extent to which the debt surge will push up borrowing costs, a previous study by the Bank of England and Harvard University showed that for every percentage point increase in a country's debt-to-GDP ratio, The market interest rate will rise by 035 percentage points.
Countries such as the United Kingdom, Italy and France are all expected to run larger-than-normal deficits this year. BlackRock warned that if British politicians try to win votes by promising more spending, they could trigger a sell-off in British bonds.
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