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Julio Suarez
AFME Q1 2023 European High Yield and Leveraged Loan Report
1 Jun 2023
The Report contains European leveraged finance market trends for the first quarter of 2023, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €41.8 billion in proceeds in 1Q’23, an 11.8% increase from €37.4 billion in 4Q’22 and a 30.5% decrease from €60.2 billion in 1Q’22. High yield bond issuance totalled €12.7 billion on 36 deals in 1Q'23, an 18.5% increase from €10.7 billion in 4Q’22 and a 22.7% decrease from €16.5 billion in 1Q’22. The proportion of USD-denominated issuance increased to 11.2% of all issuance in 1Q’23, up from 5.2% in 4Q’22 but down from 22.3% in 1Q’22. The leading use of proceeds for high yield bond issuance in 1Q’23 was general corporate purposes, at €7.2 billion, which was higher than €6.5 billion in 4Q’22 and than €3.6 billion in 1Q’22. Preliminary data for 2Q’23 as of end May shows that high yield bond issuance has recently increased with volumes already close to those issued in the entire first quarter (€8.3 billion in April and €3.7 billion in May), although below the monthly average observed in 2021 (€13 billion). Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €29.1 billion in 1Q’23, up 9.2% from €26.6 billion in 4Q’22 and down 29.4% from €41.2 billion in 1Q’22. 70.5% of deals financed in 1Q’23 were issued for refinancing and/or repayment of debt, up from 63.2% in 4Q’22, and from 41.6% in 1Q’22. Credit quality: S&P reported the trailing 12-month speculative-grade bond default rate at 3.0% in March 2023, an increase from 2.2% in December 2022. Moody’s reported the speculative-grade default rate at 2.6% in March 2023, down from 2.8% in December 2022. There were 11 bond defaults reported in the 1Q’23 by Standard and Poor’s and Moody’s. The reasons were missed principal payments (for 6 of them) and distressed exchange (for 5 of them). Fitch reported an increase in European Leveraged Loan default rates (by number of deals) to 1.6% in March 2023 from 1.3% in December 2022. According to Reorg, all the European leveraged loan deals examined in 1Q’23 were covenant-lite.
Julio Suarez
AFME Q1 2023 Equity Primary Markets and Trading Report
4 May 2023
AFME is pleased to circulate itsEquity Primary Markets and Trading Report for the first quarter of 2023 (Q1 2023). The report provides an update on the performance of the equity market in Europe in activities such as primary issuance, Mergers and Acquisitions (M&A), equity liquidity structure, and market valuations. Key findings: Equity underwriting on European exchanges rose 70% YoY in Q1’23. The increase was driven by the low base in 2022, as Q1’22 represented the lowest issued amount in over a decade. The Q1’23 issued amount stood 20% below 2Y and 5Y quarterly averages. IPOs accumulated €1bn in deal value in Q1’23 on 16 deals, a 48% YoY decline continuing a sequence of underwhelming quarters for primary offerings. Two deals represented 80% of the total quarterly issued amount. IPOs on the London Stock Exchange stood at the lowest Q1 deal value since 2009. European SPAC IPOs have visibly declined from a peak of €3.2bn in Q2’21 to no deals in Q1’23. Completed Mergers and Acquisitions (M&A) declined when measured as announced value (-60% YoY) and when measured as completed value (-47% YoY). De-SPACS represented 1% of the total M&A value announced during Q1’23, the same proportion observed in 2022FY but below that during 2021 (5%). Average daily equity trading on European main markets and MTFs stood at €83.3bn in Q1’23, a 15% decrease compared to Q1’22. Double Volume Cap (DVC) update: The number of instruments suspended under the DVC has recently declined to 308, from 551 in December 2022. By geographical location, 185 of the 308 suspended instruments have EU ISINs (or 60% of the total number of suspended instruments), 13 have UK ISINs (4% of suspensions) and 110 from the rest of the world (or 36% of suspensions). European equity trading mix: According to BigXYT data, on-venue trading represented 76% of the total addressable liquidity in Q1’23. Volume traded off-venues, on systematic internalisers and pure OTC, represent the remaining 24% of the volume of the total addressable liquidity.
Julio Suarez
AFME ESG Finance Report Q1 2023
27 Apr 2023
AFME is pleased to circulate its European ESG Finance quarterly data report for the first quarter of 2023. The aim of this report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe. This Report contains up to date trends for the European Sustainable Finance market as at 31 March 2023, as well as a high-level regulatory and supervisory snapshot. Key highlights: European ESG bond and loan issuance accumulated €156bn in proceeds during Q1’23, a 10.7% quarterly increase. The increase was predominantly driven by ESG-labelled bonds which accumulated €116bn in proceeds, the second largest quarterly issued amount on records. Green bond issuance grew 69.6% year-on-year (63.9% QoQ). The increase was driven by the corporate and supranational sectors. Social bond issuance increased 8.2% YoY (23.5% QoQ). We continue to observea strong participation of the French agency CADES as it consolidates as a market leader for social bonds. Sustainable bond issuance increased 47.6% YoY (97.4% QoQ). France and Spain were the top issuer nationalities in Q1’23. Sustainable-linked bond issuance declined 40.1% from the previous year but increased 26.0% QoQ. ESG securitisation issuance accumulated €1.1bn in proceeds, an increase of 103.3% compared to the first quarter of 2022. Sustainability-linked and green-linked loans decreased 56.4% YoY and 49.7% QoQ. Carbon prices: the European Union Allowance (EuA) price per metric tonne finalised Q1'23 at €89.2/Tn, from €83.3/Tn at the end of 2022. During the first weeks of Q2’23, EuA spot prices have marginally increased to €92.8/Tn. Global ESG Funds rose marginally during Q1’23. Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $7.9tn as of Q1’23 a 0.11% increase from Q4’22 but a 10.7% decrease from Q1’22. The marginal quarterly increase was driven by higher asset valuations partially offset by outflows which accumulated $27.1bn during Q1’23. ESG price premia: spreads of corporate ESG bonds against non-sustainable benchmarks have tightened in the first quarter of the year from c2.5bps at the start of the year to c0bps in April 2023. Regulatory update: We present a selective list of upcoming European initiatives for 2023. For a more comprehensive update please see AFME and Linklaters report Sustainable Finance in Europe: Regulatory State of Play (2023 updated edition)
Julio Suarez
AFME Securitisation Data Snapshot: Q1 2023
18 Apr 2023
AFME is pleased to circulate theEuropean Securitisation Data Snapshot for Q1 2023. Key highlights: Q1 2023 European Issuance In Q1 2023, EUR 35.9 bn of securitised product was issued inEurope, a decrease of 45.2% from Q4 2022 (EUR 65.5 bn) and a decrease of 43.9% from Q1 2022 (EUR 63.9 bn). Of this, EUR 19.9 bn was placed, representing 55.4% of the total, compared to EUR 11.6 bn placed in Q4 2022 (representing 17.7% of EUR 65.5 bn) and EUR 32.7 bn placed in Q1 2022 (representing 51.2% of EUR 63.9 bn). In Q1 2023, Pan-European CLOs led placed totals, followed by UK RMBS and German Auto ABS. Pan-European CLOs increased from EUR 6.0 bn in Q4 2022 to EUR 6.5 bn in Q1 2023; UK RMBS increased from EUR 1.7 bn in Q4 2022 to EUR 4.9 bn in Q1 2023; and German Auto ABS increased from EUR 0.9 bn in Q4 2022 to EUR 4.2 bn in Q1 2023.
Julio Suarez
AFME Government Bond Data Report Q4 2022 and 2022 Full Year
30 Mar 2023
AFME is pleased to shareits Q4 2022 and 2022 Full Year Government Bond Data Report. Report highlights include: European sovereign bond issuance remains above pre-pandemic levels: in 2022FY, European sovereign bond issuance, including issuance from EU Member States, the UK and the European Commission accumulated EUR 3163 bn in proceeds, 5.4% below 2021 but 32.7% above 2019. In Q4 2022, EU Member States and the UK accumulated EUR 770 bn in bonds and bills issuance, which represents an increase of 18.7% (YoY) compared to 4Q21, and a decrease of 11.0% (QoQ) compared to 3Q22. In 2022FY, European government bond trading increased 15.4% compared to 2021 and 19.4% compared to 2019 (pre-pandemic), according to TraX data from MarketAxess. The traded amount in 2022FY was the highest average daily trading volume in European government bonds since records began in 2014, following consistently high trading volumes reported in all quarters of 2022. During 4Q 2022, European quarterly traded volumes decreased 1.1% (QoQ) but increased 14.2% (YoY). Outstanding amount of European ESG government bonds reached EUR 333 bn during 4Q22. Volumes were driven by tap issuance in the UK (EUR 2.4 bn), Italy (EUR 2.0 bn), Spain (EUR 1.0 bn), Germany (EUR 1.0 bn) and additional green references issued in Hungary (EUR 1.4 bn). In Austria, a green government bill (EUR 1.0 bn) was issued during 4Q22, representing the first of its kind in the European sovereign space. The inaugural green bill, and green commercial paper which Austria plans to issue from 2023, is part of an overall programme to fund 20% of green expenditure in Austria via short term green debt. There was a net loss of 2 primary dealers in Europe from September 2022 to January 2023. There were 4 exits and 2 entries of banks to European Primary Dealer systems affecting sovereign debt markets in 4 countries and the European Commission Primary Dealer Network (EU PDN). During 4Q22 there was 1 long-term credit rating upgrades for European countries and no downgrades. This follows 1 upgrade and no downgrades in 1Q22, 2 upgrades and no downgrades in 2Q22 and 5 upgrades and no downgrades in 3Q22, bringing the 2022 full-year total to 9 upgrades and no downgrades. Most recently during 1Q23, Greece has been upgraded by one notch and Hungary downgraded by one notch in credit rating. The average bid-cover ratio (demand/amount allocated) was 2.1 in 4Q22, a decrease of 9.6% (QoQ) from 3Q22 and a decrease of 7.1% from 4Q21 (YoY).
Julio Suarez
AFME Prudential Data Report Q4 2022 and full year 2022
27 Mar 2023
This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 31 December 2022. It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as at March 2023. Among the main findings of this report: European GSIBs end-point CET1 ratio declined to 13.9% in 2022 from a record high of 14.5% in 2021 but continued above pre-pandemic levels. The factors behind the decline include higher RWAs, higher distributions and buybacks after a year of record profits for some institutions, regulatory headwinds, and a partial negative contribution from portfolio losses reflected in lower other comprehensive income. Retained earnings partially contributed to CET1 capital. It is estimated that Minimum Distributable Amounts (MDA) buffers finalized 2022 with a large buffer of 420bps on a weighted average basis. CoCo risk premia rises following AT1 writedown of a large institution. AT1 option-adjusted spreads (OAS) have rapidly increased during March 2023 following a volatile period for the banking sector and the write-off of the total balance of AT1 notes of a large Swiss GSIB. AT1 OAS have increased the most for bonds rated below investment grade credit ratings reaching 20bps below pandemic highs, representing an increase of 340bps in March. Investment grade AT1s have also increased in March 2023 by 190bps but continues 120bps below pandemic highs. Risk premia for T2 notes have not increased at the same proportion as that of AT1s. Unratedness of corporates: The box on pages 22-27 discusses the issue of unratedness of European corporates and its repercussions for Basel 3 implementation in Europe. Basel 3 maintains the current 100% risk weight (RW) for lending to unrated corporates (except SMEs) when calculating a bank's risk-weighted assets, regardless of the real credit quality of the corporate. This will be particularly impactful due to the implementation of the Output Floor which limits the benefits banks can derive from using internal models to calculate minimum capital requirements (RWAs generated by internal models cannot, in aggregate, fall below 72.5% of the risk-weighted assets computed by the standardised approaches). It’s estimated around 75% of corporates in the EU are unrated. Market data also suggests that in Sweden and Norway, unrated bond issuers are significantly more prevalent than rated issuers. The implementation of stringent risk weights for corporate lending will have asymmetric repercussions between the US and the EU, with a higher cost for EU corporates considering their higher reliance on bank lending. For a more detailed analysis please refer to the AFME ISDA position paper on the Output Floor under the CRR3, available here.
European Benchmarking Exercise for Private Securitisations – Updated Report (H1 2022)
22 Mar 2023
European Benchmarking Exercise for Private Securitisations – Updated Report (H1 2022) This report is part of the European Benchmarking Exercise, a market-led initiative organised by AFME, EDW and TSI, and contains results from H1 2022. Its purpose is to further enhance the quality and usefulness of disclosure in the private cash securitisation market, both ABCP and non-ABCP, in the EU and the UK, in order to assist market participants and reassure supervisors. Synthetic securitisations and public ABS bonds are not in scope. It provides aggregated transaction-level data gathered from 12 banks (BayernLB, BNP Paribas, Commerzbank, Credit Agricole, DZ Bank, Helaba, HSBC, ING, LBBW, Natixis, RBI and UniCredit) across 6 countries (Austria, France, Germany, Italy, Netherlands, and the UK) on a voluntary basis. The report shows that non-public securitisation markets are an important source of financing for the real economy.The overall private securitisation market is estimated at least €183bn of total commitments, with the exercise-related dataset covering €67bn of those commitments. Private securitisations backed by trade receivables and auto loans or leasing make up around 82% of the market, of which 33% and 88% respectively are funded through syndicated transactions. In addition, over 70% of private cash securitisations fund sellers in the EU, and over 68% directly fund the real economy (non-financial) sectors of the economy. AFME and TSI would like to thank all members who participated, and the EDW for their role in analysing and ensuring data quality. This report is the third in a series of such reports to be published regularly over time. For the European Benchmarking Exercise Report – H1 2021, please see here. For the European Benchmarking Exercise Report – H2 2021, please see here.
Julio Suarez
Securitisation Data Report Q4 2022 and 2022 Full Year
14 Mar 2023
AFME is pleased to share its Q4 2022 and 2022 FY Securitisation Data Report. Main findings: In 2022FY, EUR 203.3bn of securitised product was issued in Europe, a decrease of 12.8% from the EUR 233.1bn issued in 2021. Of the EUR 203.3bn issued during 2022FY, EUR 79.7bn was placed, representing 39.2% of the total, compared to EUR 126.0bn placed in 2021 representing 54.1% of the total. By asset class, RMBS issuance increased 21.2% in 2022FY driven by high volumes issued in 1Q22. The UK RMBS market continued to make a strong contribution to European issuance, accounting for 38% of total RMBS issuance in Europe during 2022. SME securitisation issuance remained comparable to 2021 and was up 3.2% during 2022FY, while issuance in the ABS, CDO / CLO and CMBS categories decreased by 45.8%, 32.4% and 23.9% respectively. Total (placed and retained) outstanding volumes (ex-CLOs) decreased to EUR 930.2bn outstanding at the end of Q4 2022, a decrease of 0.66% QoQ and a decrease of 7.85% YoY. In Q4 2022, EUR 65.5bn of securitised product was issued in Europe, an increase of 66.4% from Q3 2022 and a decrease of 34.7% from Q4 2021. Of the EUR 65.5bn issued, EUR 11.6bn was placed, representing 17.7% of the total, compared to the 48.2% of issuance in Q3 2022 and 46.7% of issuance in Q4 2021. STS issuance: In Q4 2022, EUR 30.6bn of securitised product was notified as STS to ESMA, representing 46.7% of the total issued volume in Q4 2022 (EUR 65.5bn). Out of the EUR 30.6bn in STS issuance, EUR 3.8bn was placed, representing 32.8% of total placed issuance in Q4 2022 (EUR 11.6 bn).
Julio Suarez
AFME European High Yield and Leveraged Loan Report Q4 2022
14 Mar 2023
TheReportcontains European leveraged finance market trends for the fourth quarter of 2022, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuanceaccumulated €37.4 billion in proceeds in 4Q'22, a 31.4% quarter-on-quarter (QoQ) decrease and a 57.8% year-on-year (YoY) decrease. High yield bond issuancetotalled €10.7 billion on 28 deals in 4Q'22, a 114% increase from €5.0 billion in 3Q’22 but a 73.0% decrease from €39.8 billion in 4Q’21. The proportion of USD-denominated issuance decreased to 5.2% of all issuances in 4Q'22, down from 9.3% in 3Q’22 and from 28.8% in 4Q’21. The leading use of proceeds for high yield bond issuance in 4Q'22 was general corporate purposes, at €6.5 billion, which was higher than €3.1 billion in 3Q’21 but lower than €13.2 billion in 4Q’21. Preliminary data for 1Q’23 indicates that high yield bond issuance continues below its long-term average, accumulating €10 billion in proceeds in the first two months of 2023 (€16 billion in the first two months of 2022, €28 billion in 2021, and €29 billion in 2020). Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €26.6 billion in 4Q'22, down 46.1% from €49.4 billion in 3Q’22 and down 45.5% from €48.8 billion in 4Q’21 63.2% of deals financed in 4Q'22 were issued for refinancing and/or repayment of debt, up from 22.5% in 3Q’22, and from 25.5% in 4Q’21. General Corporate Purposes was the second largest use of proceeds in 4Q'22 with €3.6 billion, followed by Acquisitions with €2.7 billion. Credit quality:S&P reported the trailing 12-month speculative-grade bond default rate at 2.2% in December 2022, an increase from 1.8% in December 2021. Moody's reported the speculative-grade default rate at 2.8% in December 2022, up from 1.2% in December 2021. There were 7 bond defaults reported in the 4Q’22 by Standard and Poor’s and Moody’s. The reasons were distressed exchange, missed principal payments and bankruptcy. Fitch reported an increase in European Leveraged Loan default rates (by value) to 0.6% in December 2022 from 0.4% in June 2022 According to Reorg, nearly all the European leveraged loan deals examined in 2022 were covenant-lite
Julio Suarez
AFME ESG Finance Report Q4 2022 and Full Year 2022
22 Feb 2023
AFME is pleased to circulate its European ESG Finance quarterly data report for the fourth quarter of 2022 and full year 2022. The aim of this report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe. This Report contains up to date trends for the European Sustainable Finance market as at 31 December 2022, as well as a high-level regulatory and supervisory snapshot. Key highlights: European ESG bond and loan issuance accumulated €680bn in proceeds during 2022, a 10% annual decline predominantly driven by lower social bond issuance. ESG bonds and loans include ESG-labelled bonds (proceeds-based), sustainable-linked bonds, transition bonds, green-linked loans, and sustainable-linked loans. Green bond issuance grew 6% in 2022 notwithstanding the wider market turbulence of the year. Social bond issuance declined 40% in 2022FY. The strong participation of the French agency CADES did not offset the contraction in European Commission Social bond issuance. Sustainable bond issuance declined 12%FY, which is of similar proportion than the wider market contraction in non-ESG bonds during the year. Sustainable-linked bond declined 16% in 2022 notwithstanding a quarterly record amount in Q1’22. ESG securitisation issuance declined from €8bn in 2021 to €1.2bn in 2022. Carbon prices: the European Union Allowance (EuA) price per metric tonne finalised Q4'22 at €81/Tn, from €80/Tn at the end of 2021. During the first months of Q1’23, EuA spot prices have increased to €100/Tn. Global ESG Funds rose during Q4’22, after a sequence of quarterly declines during the first three quarters of the year. Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $7.7tn as of Q4’22 a 18% decrease from Q4’21 ($9.4tn). The full-year contraction was driven predominantly by lower valuations as total outflows accumulated only $1bn during 2022. ESG price premia: spreads of corporate ESG bonds against non-sustainable benchmarks widened in the second half of the year from c1bps at the start of the year to c4bps in November 2022, before returning to c1bps in early 2023. Regulatory update: We present a selective list of upcoming European initiatives for Q4’22 and 2023.
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