Investment Grade Market

EMEA IG Loan Volume (EUR b) The European primary market has returned to regular activity

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

Investment Grade Market - Market observation per 8 November 2021 -

EMEA IG loan volume decreases both year-on-year and quarter-on-quarter

  • Q3 ‘21 EMEA investment grade (IG) loan volume dropped 10% compared to the same period last year and dropped 45% compared to previous quarter
  • Since almost all short-term liquidity and government backed loans have been refinanced or repaid, Europe’s primary market focus has returned to regular activity
  • Refinancing activity has been driven by issuers looking to opportunistically refinance existing facilities to include sustainability metrics

Corporate IG bonds show year to date tightening

  • During the first ten months of 2021, circa 70% of corporate IG tranches were quoted tighter than launch
  • 80% of October’s IG corporate new issuance quoted tighter than launch

Fluctuations in benchmark costs are driven by volatile swap rates

  • In Q4 ’21, Eurozone IG credit default swap (CDS) spreads slightly increased on the back of October’s stock market rally, yet remained stable at around 50 bps
  • Benchmark IG funding costs (5-year IRS + IG CDS spreads) fluctuations are mainly the result of movements in IRS rates
  • The rising IRS rates in Q3 ’21 have widened benchmark costs significantly. Decreasing IRS rates during early November ’21 strengthen benchmark costs somewhat
  • As per 5 November ‘21, benchmark costs stand at around 30 - 35 bps