Investment Grade Market

EMEA IG Loan Volume (EUR b) Refinancing activity slows down

Eurozone IG credit margin and IRS CDS spreads (as a proxy for credit margin) stabilized

Investment Grade Market - Market observation per 23 August 2021 -

EMEA IG loan markets slowly recover while issuers remain cautious

  • Q2 ‘21 EMEA IG loan volume rose 10% compared to previous quarter yet dropped 25% compared to the same period last year
  • Despite gradual opening of economies and a return of terms & conditions to pre-Covid levels, issuers have remained cautious. This may be due to an uncertain economic outlook and mounting concerns that the best economic recovery may be already behind us
  • Corporates waiting for pricing and maturities to fully return to, or even improve compared to, pre-Covid levels further impacts refinancing activity

Early August ’21, borrowing costs of IG issuers fell to a record low

  • Yields have decreased during the summer period and spreads have tightened to very attractive levels
  • Almost 65% of July’s investment grade (IG) corporate new issuance quoted tighter than launch

Fluctuations in benchmark costs are driven by volatile swap rates

  • Eurozone IG credit default swap (CDS) spreads remained stable at around 50 bps Benchmark IG funding costs (5-year IRS + IG CDS spreads) fluctuate, mainly as a result of movements in IRS rates
  • The rising IRS rates in Q2 ’21 have widened benchmark costs somewhat. Decreasing IRS rates in Q3 ’21 strengthen benchmark costs again, keeping benchmark costs remarkably low
  • As per 23 August ‘21, benchmark costs stand at around 10 bps