For Europe's bond bankers, summer comes early as issuers 'down tools'

With just days to go before the end of the second quarter, Europe’s primary bond market has slowed from strong levels of issuance in April and May to the quietest June in more than a decade, as economic and political uncertainties loom heading into the summer.

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Issuers in Europe had sold $ 984.8 billion worth of bonds globally by the end of May, according to data firm Dealogic, a rise of 11% year-on-year that was largely due to very strong supply in April and May.

However, just $ 57.8 billion was added to this total between June 1 and June 21 – the lowest amount for that period since 2002.

Debt capital markets bankers said the UK’s impending vote on whether to leave the European Union as well as other political events had influenced issuers’ plans.

Mark Lewellen, Barclays’ co-head of global DCM, said: “Volumes so far in June have been very light, which is not unexpected given that the [referendum] polls and market volatility. Some issuers have downed tools over the last couple of weeks and are waiting to see what the outcome is.”

He added: “There was also a reasonable amount of supply through April and May as issuers got in ahead. If you needed to fund in the first half, consensus was it was better to get ahead than wait until the week before [the vote].”

At BNP Paribas, Fred Zorzi, global head of debt syndicate, said: “What we’ve seen is a lot issuance has been executed ahead of political events, whether that’s the UK referendum or the Spanish election [set for June 26]. We could have a second wave from people who were not ready.”

Bankers are sanguine about the slowdown given the levels of activity earlier in the quarter.

Jean-Marc Mercier, global co-head of debt capital markets at HSBC, said: “After a difficult February when the markets were really suffering, we’ve been catching up very fast. Q2 has been very good and issuers have been able to access the market with duration – we’ve seen, for example, France, Belgium and Spain do 50-year bonds. June has been a bit slower but we always knew it would be slower with the UK referendum and the Fed [rates] decision at roughly the same time.”

For the year-to-date, European bond issuance is up 8% at $ 1.04 trillion, compared to global internationally marketed issuance that is almost unchanged year-on-year at $ 2.2 trillion. Barclays, HSBC and BNP Paribas hold the top three spots for European DCM deals in 2016, according to Dealogic.

Belgian beer company Anheuser-Busch InBev has dominated the European market with deals linked to its takeover of SABMiller – its $ 46 billion and €13.25 billion bonds sold in January and March are the biggest deals from Europe in 2016.

After the bumper beer bonds, sovereign trades from France, Spain and Italy are the year’s next largest from Europe.

The biggest European bond so far in June is a €3 billion issuance from France’s Air Liquide, issued to help refinance its $ 13.4 billion acquisition of Airgas of the US, announced in 2015.

****Correction:** Mark Lewellen is Barclays’ co-head of global DCM. An earlier version of this article referred to him as head of DCM for Europe, the Middle East and Africa.

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