European Debt Sales Jumped as Sovereign Crisis Eased, BIS Says
Bond sales by European governments and companies rebounded 15 percent in the third quarter over the previous three months amid a lull in the sovereign debt crisis, according to the Bank for International Settlements.
Gross issuance, at $1.93 trillion, was still lower than the $2.18 trillion recorded in the first three months of 2010, Basel, Switzerland-based BIS said in its latest Quarterly Review released today. A 7 percent decline in repayments left net sales at $475 billion, from $111 billion in the second quarter and $603 billion in the three months through March, the BIS said in the report. Banks led the increase in borrowing, it said.
Bond sales slumped in the second quarter as concern that the region’s most indebted countries would not be able to finance their budget deficits deterred buyers and caused bond yields in so-called peripheral markets to jump to euro-era records. The European Union and the International Monetary Fund crafted a 750-billion euro ($991 billion) rescue package in May. Greece was the first nation to get direct financial assistance.
“The key factor behind the rebound in issuance was the return to the market of borrowers resident in the developed economies as confidence recovered from the lows reached in early May,” according to the report.
“European issuers, whose net redemptions had mainly driven the sharp drop in activity in the second quarter, began to tap the market again in August and September,” the report added. “Over the quarter as a whole, they issued $215 billion worth of international debt securities.”
U.K. banks sold $71 billion of securities in the third quarter, the most in the region, according to the BIS. Dutch and Spanish banks borrowed $62 billion and $32 billion respectively while French lenders increased their borrowing 10 times from the previous three months to $31 billion. Sales by Greek banks collapsed 82 percent to $8 billion.
The BIS was formed in 1930 and acts as a central bank for the world’s monetary authorities.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Keith Campbell in London at k.campbell@bloomberg.net.
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