New Issuance

New Issuance Benelux Market

New Issuance - Market observation per 17 May 2021 -

European debt markets proved to be resilient against the backdrop of US inflation figures

  • Corporate bond trading restrained after publication of US inflation figures, marking the highest US consumer price increase since 2009
  • The response by bond investors was opposite to equity markets, which experienced a large sell-off
  • Resilience of bond markets is caused by IG debt having some sort of buffer to absorb rising rates
  • Additionally, central banks continue to provide cheap money, thereby boosting corporate funding. This implies that an increase in market borrowing costs does not cause major risks

Even IG bonds do not show a major response to inflation fears

  • IG bonds are generally more sensitive to any threat of increasing interest rates caused by inflation compared to high-yield debt, since IG bonds often have longer life spans and carry lower risk premia. This tendency is known as duration risk
  • Investors expect the resilience to continue, as supportive ECB and Fed policies and low funding costs overshadow inflation fear
  • Nevertheless, markets will continuously monitor new developments