German Automakers to Likely Keep Bond Market Liquidity Wheels Turning

Updated on
  • Daimler, VW, BMW among firms with biggest upcoming maturities
  • Company bond sales are 48.5 billion euros short of 2016 total

Europe’s biggest carmakers including BMW AG, Daimler AG and Volkswagen AG may be what stands in the way of a supply crunch in the region’s corporate bond market.

They are among borrowers with the most debt maturing before March 31, 2018, according to data compiled by Bloomberg. More than 90 billion euros ($106.7 billion) of investment grade non-financial corporate bonds come due by then, which if refinanced early, will prevent a decline in the amount of new debt sold this year.

Asset purchases by the European Central Bank and the popularity of company debt to offset the paltry yields available on government securities have left investors with not enough bonds to buy. While sales of new debt have helped ease that shortage, European corporate bond issuance this year is almost 50 billion euros short of the 2016 total and debt that could be refinanced offers the best hope of plugging that gap.

Daimler and BMW are also the two most-held issuers in the ECB’s portfolio of bonds accumulated since June 2016 in its corporate sector purchase program, according to ECB data.

The ECB holdings include 20 bonds from BMW, 25 Daimler tranches, 19 issues from Deutsche Bahn, 13 Enel deals and ten VW securities.

For a list of securities held by the ECB, click here.

Daimler has the biggest debt pile falling due, with 4.34 billion euros maturing by the end of the first quarter, according to data compiled by Bloomberg. Its last European credit market deal was a 500 million euro issue of four-year notes which priced in September. Italian utility Enel has the second highest amount of maturing debt by the end of the first quarter of 2018, with 3 billion euros falling due.

VW follows with 2.96 billion euros maturing, but it has already issued 16 billion euros of securities in European currencies this year. That makes it the most prolific corporate issuer of notes and draws a line under its debt market exile last year following its 2015 diesel emissions scandal.

While issuers need to price 48.5 billion euros in new bonds in the closing weeks of the year to keep pace with 2016, the fourth quarter is traditionally busy.

Almost 60 billion euros of securities priced in the last three months of 2016 and 43 billion euros the year before that.

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