Last week was a bonanza for Europe's corporate bond market. A wave of US issuers led a spectacular run of issuance, surprising market veterans with just how well investors digested it all. But even now it is premature to say that the market has come of age.
Investment grade companies priced €34bn-equivalent of fresh syndicated benchmark-sized bonds across 41 tranches in euros and sterling last week, according to GlobalCapital's Primary Market Monitor.
That is a staggering total; there was only €26bn-equivalent over 40 tranches priced in all of January. The average weekly benchmark issuance this year, before last week, was 12 tranches totalling €7.8bn-equivalent.
Last week was always slated to be a busy one. European Central Bank and US Federal Reserve interest rate decisions the week before and a spell of earnings blackouts had kept issuers at bay. Public holidays this week and beyond, culminating in US Thanksgiving at the end of the month, meant last week was the one clear window to dive into.
Nonetheless, the amount of business done — and how successfully — surprised senior corporate bond bankers, one of whom said he thought the market had entered new territory.
US issuers pricing Reverse Yankee deals were a big factor in the surge, producing 57% of the week's output.
It is of course an achievement that the European market can absorb so much, so quickly.
Harking back to many years ago, one veteran of the market also made great play of the size of the deals, remarking that €3bn was once the most an issuer could aspire to — with a very few exceptions.
Now, €3bn does not even raise an eyebrow. The European market can easily swallow €5bn and €7bn deals.
But even so, there had only been three deals of €5bn or more so far this year — until last week, when another three arrived.
Also impressive was that two US companies chose to price their debut hybrid capital deals in euros and sterling, to huge acclaim: Verizon with tranches of £1bn and €2.25bn and NextEra Energy with two €1.25bn clips.
Surely, then, last week marks a rite of passage for the European market into a higher phase of development?
Market participants would be wise to be sceptical.
First, those US issuers offer a clue. Alphabet may have priced €6bn on Thursday, but on Monday it had taken $17.5bn out of its home market — now that is size.
Also influential was that US issuers have a reputation for paying up to get deals done. It's no wonder investors were in the mood.
A sterner test would be if US borrowers tried to price as keenly as their European counterparts.
There is no doubt that the European corporate bond market has grown over the years, recently fuelled by seemingly endless flows of cash into credit funds as the prospect of rate cuts looms.
However, although it would be unrealistic to expect volumes like last week's to become the norm, Europe's corporate bond market does not have a track record to show that it can sustain issuance of this sort.
In particular, the US issuers that supplied more than half of last week's volume — though becoming more frequent visitors — are still visitors, which will tap euro and sterling investors when the pricing is attractive, or when it suits them as a net investment hedge.
The two hybrid deals are particularly exceptional. The European credit bid is exceptionally hot at the moment, and has pushed senior-subordinated differentials unprecedentedly tight. But in general, US issuers prefer the dollar market for their hybrid issuance.
Those excitedly claiming that Europe's corporate bond market has matured are premature. It has not reached its summit — though it is certainly making its way up through the foothills.