‘Remarkably resilient’ euro SSA market powers through turbulent year so far

The issuance of syndicated euro benchmarks from sovereign, supranational and agency issuers (SSAs) increased 6.6% by volume year-on-year in the first five months of 2025, according to data from GlobalCapital’s Primary Market Monitor.

The outbreak of the Iran war at the end of February led to a notable drop of 28% in March versus the same month in 2025. But issuers caught up in April and May, when issuance surged nearly 23% compared to the same period in 2025.

Even during the most turbulent weeks, SSAs retained primary market access.

“A lot has happened in the last five months particularly since the end of February, and yields are materially higher,” says Sean Taor, head of EMEA DCM and syndicate at Santander. “But there’s a calm in the market, which we saw from the issuance volume and the number of days the markets were open.”

Taor recalls that the primary market was quiet for two to three weeks around March-April 2025, when the US threatened to impose sweeping tariffs. “It took some time trying to find a level where issuers’ needs and investors’ demands would be aligned,” he says. “The difference this year is that the markets have been open throughout the days and weeks since the start of the Iran war and issuance volumes have actually gone up.”

With government bond yields trading towards historically high levels, it is a very good entry point for investors, Taor argues. “They are taking a view that the high yields we’re seeing are not going to be around forever,” he says. “That’s true not just in SSAs but across all asset classes.”

Asif Sherani, head of public sector DCM and head of DCM syndicate EMEA at HSBC, says the SSA market been “remarkably resilient” so far this year, “not only absorbing the increased supply but also allowing for spreads to perform, while issuers have not had to pay outsized new issue concessions, which is very impressive”.

The increase in appetite for fixed income in general and SSAs in particular was across all investor types, Sherani observes. Bank treasuries, central banks and sovereign wealth funds have increased their exposure to the sector over the last decade, he adds. On top of that, increasingly the market is seeing hedge funds and leveraged money, asset managers, and even retail investors also adding exposure to SSAs, given increased inflows and a rebalancing from equity markets into fixed income.

“SSAs’ attractiveness both outright and on a relative value basis versus credit has led to further buying,” Sherani says, “and the continued inflows were also helped by a diversification of portfolios from investors, including Asian investors.”

The strong investor appetite helped ensure sustained access to the primary market for SSAs, while also allowing for some impressive results despite the volatile backdrop.

For the first five months of 2026, euro SSA order books were more than €5bn larger on average compared to the same period in 2025. This allowed issuers to take bigger chunks of funding, with the average size of a syndicated benchmark growing by about €340m. The average coverage ratio stood at seven between January and May, compared to 5.8 a year ago and six for the whole of 2025.

The strong demand also led to the average new issue premium dropping by around 0.5bp to just over 0.8bp.

“It’s always an interesting combination when issuers can take both size and price,” says Neal Ganatra, head of SSA syndicate at Deutsche Bank. “It’s not something that you would normally observe for a prolonged period of time. Issuers tend to achieve this in Q1, but we are now five months into the year and the order books are still impressive and the spreads are even more compressed.”

Compared to previous years, a key difference is that yields have remained elevated, he adds: “Investors seem quite happy with where levels are at this stage, and the curves remain pretty steep historically even after the period of flattening earlier this year.”

Ganatra thinks that the three to four weeks of limited supply at the end of March and beginning of April could also have been helpful to the wave of issuance that followed.

April and May each proved busier for SSA benchmark issuance volume than any month in 2025, except for January, according to PMM data.

All bankers who spoke to GlobalCapital agree that, while possible, a drastic shift to higher new issue premiums are unlikely.

“If we see a significant rally in rates happening over a short period of time, it could take a lot of the yield buyers out of the equation,” says Ganatra. “But it doesn’t really feel like that’s going to be the case with the inflationary pressure we have.”

The euro market has always been a key source of long-dated funding for SSAs but this year, issuers have been funding about half a year shorter on average.

This trend is most evident among sovereign issuers. The average tenor of their syndicated bonds issued so far in 2026 has been 15.4 years, almost two years shorter than January-May 2025.

Meanwhile, the average size of sovereign syndications is about €410m larger at €5.9bn, when comparing the same two periods. The size of the average order book has also grown to more than €70bn from just under €60bn a year ago, and around €50bn in 2024.

Sovereign syndicated issuance volume increased 14.4% year-on-year for January-May in 2026 to over €195bn.

The shorter duration from sovereigns “isn’t just a case of the curves having steepened”, says Taor. “Demand has also shifted down the curve, and issuers are targeting their transactions towards the greatest demand.

“There’s also less volatility of course at the shorter end. It does however mean we’ll see a large proportion of issuance having to be refinanced every year.”

Ioannis Rallis, head of SSA DCM at JP Morgan, sees no signal that suggests book sizes will start falling, nor does he think there could be more long-dated issuance in the second half.

“For the full year, duration will be lower than in 2025,” he says. “A lot of the supply that we’ve previously had in 30 years has moved into 20 years because of a shift in investor demand, but also with issuers being a bit more sensitive to outright levels at the long end.”

Seen as a hybrid issuer between a sovereign and a supranational, the funding of the European Union also continued to evolve in 2026.

Between January and May, the bloc brought €50bn of syndicated issuance to the market, close to 60% of its syndicated volume for the whole of 2025. For the first half of 2026, the EU plans to raise €100bn across syndications and auctions, with an issuance forecast of €180bn for the whole year.

A renowned long-end issuer, the EU’s syndications have also become shorter — though not to the same extent as the sovereigns — coming in at 1.3 years shorter than the 15.9 year average of a year ago. It has raised €10bn on average per syndication, with an average book per syndication of €151bn this year. That is €34bn higher than in January-May 2025.

The EU has been able to compress its new issue premium to 1.4bp from the average of 1.85bp paid in 2025. Its bonds outperformed both swap rates and Bunds in the secondary market, resulting in skinnier spreads for its new issues in the primary market — about 30bp lower versus swaps and 20bp compared to Bunds versus a year earlier.

“Many investors, particularly international investors, see the EU as diversification against one specific government curve and that has really benefitted the EU’s performance,” says Taor. “But all SSAs, seen as alternatives to core government curves, have performed very well because of their diversification and their credit ratings remain very strong.”

He believes EU bonds will continue to perform: “It’s very clear now that the EU will remain a very relevant issuer in years to come, and that message has really sunk through to investors who now see them as a sovereign issuer but with additional spread.”

The most potential for the performance of EU bonds could be at the long end. Rallis notes that long-dated EU bonds remain cheap based on fundamentals.

“Their previous heavy issuance in the long end and much higher weighted average maturity is probably weighing on spreads and keeping their curve steeper than other sovereigns,” says Rallis. “This started to change this year, and over time, I expect the average maturity for EU to decline and the curve should flatten with that, but it’s not a story for 2026.”

Adjusting funding patterns to suit changing investor needs and market conditions is not just a story for the sovereigns and the EU.

Sherani notes that the other SSA issuers, including the multilateral development banks, have been diversifying their funding sources since late last year, from doing more in private placements and callables as well as issuing in other currencies, including Hong Kong dollars.

“The issuers are very much looking at the demand patterns and responding accordingly — something that is characterising this year,” he says.