Risky Bond Sales Sweep Europe at Fastest Pace Since Iran War
(Bloomberg) — Financial borrowers rushed to sell riskier bonds in Europe at the fastest pace since before the war in the Middle East began, signaling buoyant credit market sentiment on potential talks to end the conflict.
The likes of Goldman Sachs Group Inc. and Swiss Re AG sold junior-ranked debt, taking weekly volumes to the highest since mid-February, based on data compiled by Bloomberg. Overall, Wednesday’s action featured the biggest number of issuers and tranches in the region’s primary market since January.
The deal rush came after US President Donald Trump said the war with Iran is close to an end, lifting global sentiment. The conflict caused the biggest bout of volatility in the credit market in about a year and slowed bond sales, but metrics of risk are now retreating close to prewar levels.
“Better sentiment over the last couple of days has brought elevated new issuance,” said Laurent Frings, head of European credit research at Aegon Asset Management. “Credit markets are being super resilient in the face of risks, from the Middle East conflict to private credit and AI disruptions.”
Goldman Sachs sold a €1.4 billion ($1.65 billion) tier 2 bond and a separate £500 million ($679 million) one, according to a person familiar with the matter. It last raised regulatory capital in either of the two currencies before the global financial crisis, based on data compiled by Bloomberg. Swiss Re also tapped the tier 2 market for a €750 million bond.
Joining them in the subordinated space was insurance giant Allianz SE, which sold Restricted Tier 1 debt, the industry’s equivalent to banks’ Additional Tier 1 bonds. It is generally regarded as a savvy borrower that times its offerings well, acting as a gauge of positive sentiment.
Most indicators of risk, which partly determine how much these borrowers will need to pay to raise new debt, have been declining this month. The US and Iran are working toward extending a ceasefire and restarting negotiations about a longer-term peace deal, even as a standoff intensifies over the Strait of Hormuz.
Spreads on a Bloomberg multicurrency index of European AT1s have retreated to 248 basis points, down from 300 basis points in late March and almost on a par with prewar levels. It’s a similar picture with a tier 2 index.
Sovereign offerings also reflected the appetite for greater risk, with double-B rated Brazil raising €5 billion in its first euro-market deal in over a decade. The country’s last bond in the currency matured five years ago. The common currency has been rallying in recent days given a possible peace deal, with hedge funds ramping up bearish bets on the US dollar.
Meanwhile a sale by Italy drew record investor orders. The country raised €17.5 billion in a two-part syndication, including a 10-year bond that saw more than €159 billion of bids, topping an all-time high set earlier this year. That followed another record-smashing sale by the UK on Tuesday.
With the window for bond sales now wide open, Aegon’s Frings sees valuations from a spread perspective as seeming “pretty attractive” for issuers. Meanwhile investors are likely to be eyeing the potential for a postwar rally.
“Investor dry powder was not used much during the last couple of weeks due to war, while going into this investors were clearly positioned to buy a lot,” said Shanawaz Bhimji, head of credit strategy at ABN Amro Bank NV.
–With assistance from Abraham Gonzalez.
(Updates with Allianz and Brazil deals pricing in the sixth and ninth paragraphs respectively.)
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