Europe's Biggest Bond Manager Waits for Windows in Downturn

Updated on
  • BNP Paribas sees busy April and May after slow opening quarter
  • Issuers likely to be more opportunistic amid uncertainty

Europe’s busiest corporate bond manager is optimistic for issuance this quarter though believes borrowers will have shorter windows to sell debt amid increased volatility.

“Activity may pick up pretty significantly," and maybe as soon as this week, said Giulio Baratta, BNP Paribas’ London-based head of high-grade bonds for EMEA in an interview. The second quarter starts with “a pipeline of deals not fully executed" in the first months of the year.

Bouts of heightened global volatility contributed toward widening spreads and the worst opening quarter for European high-grade corporate issuance since 2011, according to data compiled by Bloomberg. And given the greater uncertainty over conditions, it’s now a “window market" requiring more frequent assessments of issuance prospects, Baratta said.

Supply Stalls

Company bond sales in worst start to year since 2011

Source: Bloomberg league tables

BNP Paribas tops the table of arrangers of European investment-grade bonds and was one of three coordinators of a 8 billion-euro ($9.9 billion) offering for Sanofi, the biggest European corporate bond of the year so far. That deal couldn’t offset a 33 percent monthly sales drop as volatility, the end of European Central Bank bond-buying and global tensions over the U.S.’s decision to introduce trade tariffs hindered the flow of primary sales.

Europe’s Credit Market Ends Difficult Quarter in Defensive Mood

High-grade companies have raised 73.9 billion euros equivalent from euro, sterling and dollar bond sales in Europe’s syndicated primary market this year, according to data compiled by Bloomberg. That’s a 35 percent slump on the opening quarter of 2017 when nearly 114 billion euros priced. Spreads on investment-grade bonds are at their widest in more than six months.

Baratta’s view is shared by CreditSights strategist Tomas Hirst, who said supply “looks likely to come in fits and starts" as volatility rises and falls. “If we get more M&A mega-deals, such as the Sanofi deal, then individual companies may need to pay a slight premium to get these away.”

“We could reasonably expect the second-quarter to offer bit of a catch-up but unfortunately that is likely not going to happen as the potential for event risk might leave us with extended periods where the market is closed,” Suki Mann, founder of, said in emailed comments.

“A number of issuers are now confronted with a different environment compared to a few months ago," said Patrick Wuytens, Brussels-based head of high grade syndicate at ING. “New issue supply will very much depend in how markets will find a balance between the amount of issuers wanting to issue before the end of QE and the amount of volatility impacting general investor appetite."

(Updates with spread move in fifth paragraph.)
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