The largest sellers of euro corporate bonds are taking a greater share of overall issuance than ever before, fuelling a debate about whether the European Central Bank’s bond-buying programme is mainly benefiting those who need the least support.
The top 20 issuers in the euro investment-grade bond market this year have accounted for nearly 40 per cent of overall supply, according to Bank of America Merrill Lynch analysts. This is up from previous years, with the top 20 issuers accounting for around a quarter of total supply in 2015 and 2016.
“We find that bond supply has been much more concentrated in the hands of the few, rather than the hands of the many,” the analysts noted, arguing that the European Central Bank’s corporate sector purchase programme (CSPP) has been a big catalyst.
The ECB launched its corporate bond buying scheme in June last year and now has more than €100bn of corporate bonds on its balance sheet. Just over 14 per cent of these purchases were made in the primary market for new issuance.
“Easy credit conditions have helped ‘super firms’ emerge across the credit market,” the Bank of America Merrill Lynch analysts added.
The tally of the top 20 debt sellers is based on euro investment-grade issuance that is eligible for Bank of America Merrill Lynch’s bond indices. The figures also include issuance from banks, such as Crédit Agricole and ING, as well as non-financial companies, such as Volkswagen and Pfizer.
This year has seen €202bn of investment grade euro corporate bond sales so far, according to Dealogic data. This is the fastest start to the year since 2009, which saw €221bn of issuance by July 25.
An increasing number of jumbo debt sales have boosted the figures. Three of this year’s euro investment-grade corporate bonds sales are among the top 10 largest of all time — €8bn deals from Volkswagen and General Electric and a €7bn deal from AT&T.
“There’s been a step-change in terms of volumes available and some of the jumbo deals that would’ve made headlines a few years ago, no one gives a second thought to,” said Rupert Lewis, head of European bond syndicate at BNP Paribas.
On Monday, Unilever issued €1.9bn of bonds in its largest public debt sale since May 2001, when it offered €2bn of three- and five-year bonds. Its latest deal included €500m of four-year bonds sold at a zero-coupon, the third time this year a company has sold bonds at such a long maturity that offer the buyers no interest payments.
Mr. Lewis added that not all of the jumbo-issuance in 2017 has been supported by the ECB bond-buying programme, however.
“Many of the biggest deals this year do not fit the criteria for the CSPP as they are non-eurozone issuing entities, names such as GE, AT&T and Pfizer, all US,” he added.
“My sense is that all issuers have benefited from the CSPP because spreads are so low, and I don’t think borrowers are specifically deciding to issue now because they think the ECB will buy their bonds.”