For much of the past year, and into the early months of this one, fund inflows into credit were so supportive that almost any deal could pass without a hitch.
Investors were still selective, of course, but the market rarely forced strong distinctions between names and sectors to manifest themselves in pricing.
Most trades cleared with minimal or even negative new issue premiums.
Now conditions have changed: the Middle East conflict has jolted rates and put evaluating risk sentiment firmly back on the menu.
But this volatility has not shuttered the primary market, instead it has sharpened it.
In the corporate bond market, high quality, defensive names have still managed to glide through with ease.
In contrast, cyclical borrowers and those credits more exposed to oil or inflation shock have had to either wait on the side lines for a cleaner window or pay up to get their deals done.
Take the last fortnight's flow. For instance, Danone’s €1.6bn equivalent triple tranche trade in euros and sterling on Thursday was printed with zero new issue premium across all legs.
Meanwhile, Amphenol, a single A-rated US electronic connector and fibre optic maker, only had to offer 2.5bp of concession for a €500m five year earlier this week.
But borrowers closer to the fault lines have found the welcome mat has been pulled back.
Akzo Nobel, from the more cyclical chemicals sector, paid 25bp of concession on each leg of its €1.1bn dual tranche on March 16, the highest NIP of the year, according to GlobalCapital’s Primary Market Monitor.
A divergence is happening in real time. Top tier and more defensive credits are still getting a smooth ride, with deep demand and execution that barely breaks stride. Meanwhile, more cyclical names are having to work harder for the same privilege of funding.
Access to the debt markets is not always a given, especially during times of crisis. The conflict has not broken Europe’s corporate bond market. It has reminded the market that risk is supposed to have a price.