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Julio Suarez
AFME European High Yield and Leveraged Loan Report: Q3 2021
13 Dec 2021
The Report contains European leveraged finance market trends for the third quarter of 2021, 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 €83.6 billion in proceeds in 3Q’21, a 31.4% decrease from €120 billion in 2Q’21, but a 55% increase from €53.9 billion in 3Q’20. Primary high yield bond issuance totalled €29.8 billion on 68 deals in 3Q’21, a 38.9% decrease from €48.8 billion on 117 deals in 2Q’21 and a 21% increase from €24.7 billion on 61 deals in 3Q’20. The proportion of USD-denominated issuance increased to 36.1% of all issuance in 3Q’21, from 26.6% in 2Q’21 and from 13.5% in 3Q’20. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totalled €53.8 billion in 3Q’21, down 24.6% from €71.3 billion in 2Q’21 but up 84.2% from €29.2 billion in 3Q’20. Refinancing/Repayment of Debt was the largest use of proceeds in 3Q’21 with €24.9 billion, followed by LBO/MBO with €16.5 billion and acquisitions with €9.3 billion. According to Covenant Review, 53% of all leveraged loan deals reviewed in 3Q’21 contained an ESG feature, compared to 57% of all deals reviewed in 2Q’21. According to Reorg, all of the European leverage loan deals examined in 3Q’21 were covenant-lite containing only a springing Revolving Credit Facility (RCF) leverage maintenance covenant. Credit quality: S&P reported the trailing 12-month speculative-grade bond default rate at 3.4% a decrease from 5.3% in December 2020 and from 4.3% in September 2020. Moody’s reported the trailing 12-month speculative-grade default rate at 2.4% in September 2021, down from 5.0% in December 2020 and from 3.9% in September 2020. Fitch reported a decrease in European Leveraged Loan default rates to 2.7% in September 2021 from 4.58% in December 2020 (when measured by deal value). 2 bond-related defaults were reported in the third quarter of 2021 by Standard and Poor’s and Moody’s. Distressed exchange was the reason for both defaults. According to S&P, in 3Q’21 upgrades exceeded downgrades in Europe (32 upgrades to 13 downgrades), a better ratio than 35 upgrades to 32 downgrades in 2Q’21. According to Moody’s, in 3Q’21 bond downgrades exceeded upgrades in Europe (9 upgrades to 17 downgrades), a worse ratio than 20 upgrades to 10 downgrades in 2Q’21.
Julio Suarez
Government Bond Data Report Q3 2021
3 Dec 2021
This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU+UK). Report highlights include: European (EU+UK) bonds and bills issuance continue above pre-pandemic levels with EUR 815 bn issued throughout 3Q21, which represents a decrease of 13.3% (QoQ) compared to 2Q21, and a decrease of 17.1% (YoY) compared to 3Q20. In terms of YtD (Q1-Q3) volumes, European bond and bill issuance is down 11.6% (YoY) but up 46.1% compared to 2019. Outstanding amount of European ESG government bonds reached EUR 216 bn. The UK and Spain both issued inaugural green bonds with volumes of GBP 10 bn (EUR 11.7 bn) and EUR 5.0 bn respectively during 3Q21, and Germany also issued a new green bund (EUR 3.5 bn). Most recently, the European Commission issued an inaugural green bond in 4Q21, raising EUR 12.0 bn under the NextGenerationEU (NGEU) scheme. The EU’s NextGenerationeEU (NGEU) programme is set to significantly increase official sector issuance in coming years as European Commission cumulative bond issuance is anticipated to reach EUR 890bn by end-2026, including EUR 89.6 bn of social bonds already issued during 4Q20 to 2Q21 as part of the European Commission’s SURE scheme. During Q3 2021, European quarterly traded volumes increased 1.7% (YoY) but decreased 15.9% (QoQ), according to MarketAxess. Year to date European government bond trading (YtD; Q1-Q3) during 2021 is down 1.6% compared to 2020, but up 1.6% compared to 2019. Eurozone 1Y inflation expectations continue to rise on the back of higher energy prices, supply chain frictions, and the general economic recovery. Eurozone 1Y market-implied inflation expectations were 1.8% in November 2021, as analysts’ consensus (according to Eikon) estimates a 1Y ahead annual inflation at 1.7% for 4Q21. During 3Q21 there were 3 long-term credit rating upgrades for European countries and no downgrades (following 1 upgrade and no downgrades during 1Q21, 1 upgrade and no downgrades in 2Q21) bringing the full year total to 6 upgrades and no downgrades (there was 1 further upgrade in 4Q21 to date). The average bid-cover ratio (demand/amount allocated) was 2.20 in 3Q21, a decrease of 8.6% (QoQ) from 2Q21 and an increase of 12.9% from 3Q20 (YoY).
Julio Suarez
ESG Finance Q3 2021 - European Sustainable Finance
27 Nov 2021
AFME is pleased to circulate its European ESG Finance quarterly data report for the third quarter of 2021 (Q3 2021). The aim of this quarterly 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 30 September 2021, as well as a high-level regulatory and supervisory snapshot. Key highlights: ESG bond and loan issuance decelerated in Q3 2021 compared to Q2 2021. The decline was driven by lower sustainable-linked and green-linked loan origination, seasonal factors, and the finalisation of the EU SURE scheme which in previous quarters significantly contributed to expand the social bond market. Notwithstanding the quarterly decline, year-to-date ESG bond and loan issuance volumes (€498.9bn) have already surpassed the 2020FY total (€388.7bn). ESG bond issuance represented 18% of total European bond issuance in Q1 – Q3 2021. ESG securitisation issuance in the first three quarters of 2021 reached EUR 7.5bn from eight ESG deals covering a variety of asset classes (RMBS, consumer ABS, and on-balance sheet ABS). This represents a substantial increase from EUR 2.1 bn issued in 2020FY. In Q3 2021, the UK and Spain notably issued inaugural sovereign green bonds of £10bn and €5bn respectively. The inaugural UK green gilt was the largest green bond issued during Q3 2021. Carbon prices: the European Union Allowance (EuA) price per metric tonne has continued to increase during the year, reaching €61/Tn at the end of September 2021 (and most recently €66/Tn in November 2021) from €32.8 in December 2020. EU and UK forward curves continue to anticipate further carbon price increases. Global ESG Funds slightly decreased during Q3 2021, however exhibiting annual and year-to-date increases. Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $4.87tn as of Q3 2021, a $0.9bn decrease from $4.96tn in Q2 2021 and a $1.26tn increase from $3.7tn in Q3 2020. ESG equity funds continue to be by far the largest fund asset class with 52% of total ESG funds and over 2x larger than fixed income which represents 21%. ESG price premia: spreads of corporate ESG bonds against non-sustainable benchmarks have stabilized since April 2021. ESG corporate premia has tightened from 9bps in April 2020 to 1bp on average during the months of April – November 2021. Sovereign green premium has widened for benchmark liquid references. The average greenium for German bunds has widened from an average of 2bps in December 2020 to 5bps in November 2021.
Julio Suarez
AFME Equity Primary Markets and Trading Report Q3 2021
6 Nov 2021
AFME is pleased to circulate its Equity Primary Markets and Trading Report for the third quarter of 2021 (Q3 2021). 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. In this quarter’s report we have included new data on the European equity market liquidity structure. The data shows that the majority of equity trading in Europe (82%) takes place on venues. A much smaller share takes place off-venue on alternative trading mechanisms known as systematic internalisers (SIs) which account for 10% of trading, and over the counter (OTC), which accounts for 8%, once technical trades are filtered out of the full universe of reported equity transactions. Key findings Equity underwriting on European exchanges accumulated an increase of 39% in the first three quarters of 2021 compared to the same period of 2020. However, following two exceptionally robust quarters, equity capital raising decelerated in 3Q 2021 to levels closer to historic volumes, with a decline of -46% QoQ. IPOs have accumulated €52.8bn in the first three quarters of 2021, almost 5x the amount issued in the same period of 2020. SPAC IPOs represented 11% of total European IPOs in Q3 2021, a decline from 15% in Q2 2021. Completed M&A of European companies totalled €829bn in the first three quarters of 2021 a 60% increase from the amount completed in the same period of 2021 (€519bn). This represents the highest YtD volume since 2007. The amount of announced M&A totalled €941bn in Q1-Q3 2021, an 81% increase from the same period of 2020. De-SPAC acquisitions represented 8% of the total announced European M&A in Q3 2021 (5% in Q2 2021). 86% of the announced SPAC acquisitions of European companies during Q1-Q3 2021 are De-SPACs of US-headquartered SPACs. These European companies will be effectively listed on US exchanges via their SPAC parent company. Average daily equity trading activity on European main markets and MTFs stood at €74.6bn in Q1-Q3 2021, 6% below the average daily observed in Q1-Q3 2020. Double Volume Cap (DVC) update: The number of instruments suspended under the ESMA DVC has recently increased to 380 at the EU or trading venue level as of October 2021 (from 205 in Dec-20). Domestic market capitalisation of European listed shares stood at €16.8tn at the end of September 2021, a 18% increase from €14.2 at the end of 2020. Q1-Q3 2021 YtD variation of European Equity activity EU member countries, UK and Switzerland
Julio Suarez
AFME Securitisation Data Snapshot: Q3 2021
4 Nov 2021
AFME is pleased to circulate the European Securitisation Data Snapshot for Q3 2021 Key highlights: Q3 2021 European Issuance In Q3 2021, EUR 47.6 bn of securitised product was issued in Europe, an increase of 30.8% from Q2 2021 (EUR 36.4 bn) and an increase of 18.2% from Q3 2020 (EUR 40.3 bn) Of this, EUR 23.1 bn was placed, representing 48.5% of the total, compared to EUR 25.9 bn placed in Q2 2021 (representing 71.2% of EUR 36.4 bn) and EUR 18.9 bn placed in Q3 2020 (representing 46.9% of EUR 40.3 bn) In Q3 2021, Pan-European CLOs led placed totals, followed by UK RMBS and UK CMBS Pan-European CLOs increased from EUR 8.1 bn in Q2 2021 to EUR 8.8 bn in Q3 2021 UK RMBS increased from EUR 2.9 bn in Q2 2021 to EUR 5.6 bn in Q3 2021 UK CMBS increased from EUR 0.5 bn in Q2 2021 to EUR 1.6 bn in Q3 2021
Julio Suarez
Government Bond Data Report Q2 2021
29 Sep 2021
This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU+UK). Report highlights include: European (EU+UK) bonds and bills issuance continue above pre-pandemic levels with EUR 893 bn issued throughout 2Q21. Issuance fell 3.7% (QoQ) and 33.6% (YoY), but quarterly volumes remain high by historical standards. Outstanding amount of European ESG government bonds surpassed EUR 195.0 bn during 2Q21 during which EUR 27.5 bn of social bonds and EUR 9.3 bn of green bonds were issued. Volumes were driven primarily by the European Commission social bond issuance (EUR 27.5 bn), issuance of a new green German bund (EUR 6.0 bn), and additional issuance in the French and Belgian green bonds. Outstanding volumes of European green government bonds reached EUR 103.5 bn in Q2 2021. Most recently, the inaugural GBP 10 bn UK green Gilt issued in September 2021 contributed to a further expansion in outstanding European green government bonds. During Q2 2021, European quarterly traded volumes increased 1.6% (QoQ) and 5.1% (YoY), with average traded volumes at the highest level in a second quarter since 2014, according to MarketAxess. Eurozone inflation expectations rise on the back of higher energy prices and general economic recovery. Eurozone 1Y market-implied inflation expectations reached 1.7% in September 2021, representing the highest level since 2013. The average bid-cover ratio (demand/amount allocated) was 2.23 in 2Q21, a decrease of 2.2% (QoQ) from 1Q21 and a decrease of 1.9% from 2Q20 (YoY). In France, the average bid-cover ratio of auctions reached 3.1 during Q2 2021, the highest level in AFME records, which date back to Q1 2010. However, In Italy, the average bid-cover ratio decreased to 1.4, which is the lowest level in AFME records. During 2Q21 there was 1 long-term credit rating upgrade for European countries and no downgrades (following 1 upgrade and no downgrades during 1Q21) bringing the full year total to 4 upgrades and no downgrades (there were 2 further upgrades in 3Q21 to date).
Julio Suarez
AFME Prudential Data Report Q2 2021
8 Sep 2021
This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 30 June 2021. It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as at August 2021. Among the main findings of this report: CET1 and T1 capital ratios slightly decline in Q2 2021: European GSIBs end-point CET1 ratio slightly decreased from 14.44% in 1Q21 to 14.36% in 2Q21. The decline in CET1 and T1 ratios was driven by a quarterly increase in RWAs of a larger magnitude than that of CET1 capital and T1 capital. Banks reported an increase in credit risks RWAs on the back of a surge in client demand, M&A and asset consolidation, and regulatory impact from the finalization of the euro area Targeted Review of Internal Models (TRIM). CoCo borrowing costs continue at record low: Average coupon rates of newly originated CoCos continued at 4.3% in 3Q’21, virtually the same level observed in 2Q 2021. The level, however, is significantly below that observed in 2Q 2020 (5.9%) and 2020FY (5.1%). CoCo option-adjusted spreads (OAS) have also stabilised over the last four months at c300bps, which, however, accumulates a decrease of more than 500bps from the record high levels observed at the end of Q1 2020. Stress tests results and resumption of dividend distribution in the EU, UK and the US: The Box on pages 21-26 discusses the latest stress test results undertaken by EU, UK and US banking supervisors. Although the stress scenarios vary by jurisdiction and therefore the results may not be directly comparable, the results confirm the resilience of the global banking system even in the current fragile macroeconomic circumstances as the global economy recovers from the economic effects of the pandemic. The stress tests results also support the policy decision recently taken across the three jurisdictions by lifting restrictions to banks’ dividend distributions. Banks’ resilience continues even after taking account of the impact from extremely harsh assumptions.
Julio Suarez
ESG Finance Q2 2021 - European Sustainable Finance
2 Sep 2021
AFME is pleased to circulate its European ESG Finance quarterly data report for the second quarter of 2021 (Q2 2021). The aim of this quarterly 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 30 June 2021 as well as a high-level regulatory and supervisory snapshot. Key highlights: ESG bond and loan issuance marginally decelerated in Q2 2021 compared to Q1 2021. However, ESG fixed income issuance continues to display robust volumes- during Q2 2021, European ESG Bond and Loans issuance accumulated EUR 188.7 bn in proceeds, up 227% from EUR 83.1 bn in Q2 2020, with only a 3% drop from Q1 2021. ESG Bond issuance represented 17.7% of total European bond issuance during H1 2021. ESG securitisation issuance in H1 2021 reached EUR 5.2bn on four RMBS deals and one on-balance sheet ABS, a substantial increase from EUR 0.2bn issued in 2020FY. The European Commission on behalf of the EU issued EUR 14.1 bn in social bonds in May, consolidating as the largest social bond issuer in Europe. Carbon prices: The European Union Allowance (EuA) price per metric tonne stood at €53.3 in June 2021, a 110% increase from €25.3 in June 2020 and a 62.5% increase from €32.8 in December 2020. Most recently, at the end of August, EU carbon prices surpassed €60 per metric tonne. There is significant dispersion in the price of pollution globally. The EU Emissions Trading System (ETS) had the highest allowance price globally, followed by the Switzerland ETS at €39.25, and the New Zealand ETS at €22.1 as of end Q2 2021. Contrastingly, the Regional Greenhouse Gas Initiative (USA) has an allowance price of only €7.2. ESG Funds: Global ESG Funds continued to grow during Q2 2021 across all the major asset classes, with the exception of Money Market ESG Funds. Funds with an ESG mandate (including Mutual Funds and ETFs) totaled $4.36tn as of Q2 2021, a $200bn increase from $4.16tn in Q1 2021. ESG equity funds continue to be by far the largest fund asset class, over 3x larger than fixed income funds. ESG price premia: Spreads of corporate ESG bonds against non-sustainable benchmarks have stabilized during Q2 2021. ESG premia has tightened from 9bps in April 2020 to 1bp on average during the months of April – July 2021.
Julio Suarez
AFME Securitisation Data Report Q2 2021
2 Sep 2021
AFME is pleased to circulate its Q2 2021 Securitisation Data Report. Main findings: In Q2 2021, EUR 36.4 bn of securitised product was issued in Europe, a decrease of 25.6% from Q1 2021 and a decrease of 26.0% from Q2 2020. H1 2021 (Q1+Q2) represents the lowest half-year European securitisation issuance on record. Outstanding volumes (ex-CLOs) decreased to EUR 972.4 bn at the end of Q2 2021, a decrease of 1.6% QoQ and a decrease of 2.8% YoY. Credit Quality: In Europe, upgrades comprised 84% of total rating actions by the four CRAs during Q2 2021, compared to 76% of total rating actions during Q1 2021. STS issuance: In Q2 2021, EUR 11.2 bn of total (placed and retained) securitised product was notified as Simple Transparent and Standardised (STS) by ESMA, representing 30.8% of total issued volume in Q2 2021 (EUR 36.4 bn). Out of the EUR 11.2 bn in STS issuance, EUR 8.9 bn was placed, representing 34.1% of total placed issuance in Q2 2021 (EUR 26.1 bn)
Julio Suarez
Equity capital markets continue rapid expansion in H1 2021
12 Aug 2021
AFME is pleased to circulate its Equity Primary Markets and Trading Report for the second quarter of 2021 (Q2 2021). 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), trading, and equity valuations. Key highlights: Equity underwriting on European exchanges rose 70% in H1 2021 compared to H1 2020 and 108% compared to H1 2019. IPOs rose by 7.5x year-on-year (YoY) with the largest H1 amount of proceeds since 2015. SPAC IPOs represented 15% of total European IPOs in Q2 2021 (vs. 22% of the total in the US during the same quarter). In Q2 2021, equity issuance on Jr exchanges reached a quarterly record amount of €7.7bn in proceeds. Completed Mergers and Acquisitions (M&A) of European companies totalled €523.9bn in H1 2021, a 50% increase from H1 2020 and a 20% increase from H1 2019. Announced M&A totalled €622.2bn in H1 2021, a 99% increase from H1 2020 and 56.4% increase compared to H1 2019. De-SPAC acquisitions represented 6% of the total announced M&A volume in Europe in Q2 2021 (vs 16% of the total in the US). Average daily equity trading activity on European main markets and MTFs stood at €68.2bn in H1 2021, 7% below the average daily observed in H1 2020. Double Volume Cap (DVC) update: the number of instruments banned from dark trading has recently increased to 307 at the EU or trading venue level as of July 2021 (from 205 in Dec-20).
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