• Home
  • Home
  • Daily Papers
  • Awards / Events
  • GlobalCapital
  • Free Trial
Close

Copying and distributing are prohibited without permission of the publisher.

Watermark
  • Print

Corporate bond issuance set to boom

By Chris Wright
10 May 2013

A steep rise in corporate debt issuance has raised concerns of a bubble but a leading banker tells Emerging Markets there is no danger

Emerging Europe is experiencing a boom in corporate bond issuance, fuelling concerns about a bubble in lower-rated emerging market debt.

Debt issuance in Central and Eastern Europe, Middle East and Africa is close to $90 billion in volumes already this year, according to Martin Hibbert, head of DCM origination for CEEMEA at Deutsche Bank.

But more significantly, the composition of those volumes has changed. “This year has not been so much sovereign and financial paper, but a lot of corporate issuance,” said Hibbert.

In a typical year, half of the market is sovereign, 30% financial institutions and 20% corporate, but this year almost half of all issuance has been corporate, including multi-billion dollar deals for Gazprom, Lukoil and Saudi Electric.

In one particularly eye-catching deal, Russia’s Lukoil, which is rated Baa2/BBB, raised $3 billion in an offer last month that was three times oversubscribed.

“This is no longer a fringe asset class but a mainstream part of the market with substantial issuance, market access, and the ability to do large transactions,” Hibbert said.

The increase in issuance, and the fervent appetite for it, has begun to cause some alarm. Last week Charles Robertson, global chief economist of Renaissance Capital, spoke of a “dollar bond bubble”, citing as evidence the issue of 10 corporate dollar bonds from Ukraine so far this year and the yield on single B-rated Rwanda’s debut 10-year bond, which was below 7%.

 More from Emergingmarkets.org
 Read the latest news stories here
 Click here to read the latest features
 Register for free to receive the weekly newsletter

He argued that a bubble in local currency debt in emerging markets would follow. Bankers agree that yields have become tight, and are probably no longer what attracts buyers to emerging Europe paper. “I’m not sure about the yield argument,” said one. “Where’s the yield when 10-year Russia is trading below 3%?”

But they argued this was not in itself evidence of a problem and insisted there was no cause for alarm. Asked by Emerging Markets if there was a risk of a bubble in emerging market debt, Raiffeisen Bank International CEO Herbert Stepic said: “oh for goodness sake! The overall lending activity has reduced considerably. To talk about a bubble, with demand so much reduced – I don’t see it at all.”

Stepic and others argue that higher bond issuance reflects a healthy reduction in loans, with capital markets replacing banks. “This is more or less an Americanization of Europe. This is what the Americans have been doing for the last 50 years,” Stepic said. Bankers expect to see issuance from the region continuing to grow. “If anything, you would say: we haven’t seen too much [financial institution] issuance coming out, and that may step up,” said Hibbert.

- Follow us on twitter @emrgingmarkets

By Chris Wright
10 May 2013
  • HOME
  • GLOBALMARKETS
  • Latest news from GlobalMarkets

    1. EM debt pressures build as IMF calls for ‘early’ action on restructuring

      15 Oct 2020
    2. Post-Covid world will demand ‘new more humane’ capitalism

      15 Oct 2020
    3. IADB to roll out hurricane clauses as small state pleas gain traction

      15 Oct 2020
    4. IMF will need Bank’s help to fulfil climate ambition

      15 Oct 2020
    5. Biden victory to boost Asia but China tensions to remain

      15 Oct 2020
  • Most viewed: GlobalMarkets

    1. EBRD marks out green goals and Africa expansion for next five years

  • Print
  • Latest news from GlobalMarkets

    1. EM debt pressures build as IMF calls for ‘early’ action on restructuring

      15 Oct 2020
    2. Post-Covid world will demand ‘new more humane’ capitalism

      15 Oct 2020
    3. IADB to roll out hurricane clauses as small state pleas gain traction

      15 Oct 2020
    4. IMF will need Bank’s help to fulfil climate ambition

      15 Oct 2020
    5. Biden victory to boost Asia but China tensions to remain

      15 Oct 2020
  • Most viewed: GlobalMarkets

    1. EBRD marks out green goals and Africa expansion for next five years

Further reading

  • Corporate bond investors 'freaking out' at ECB amid 'unhealthy' market

    High Grade

    Corporate bond investors 'freaking out' at ECB amid 'unhealthy' market

  • NCB sells AT1, market anticipates govvie deal

    Middle East

    NCB sells AT1, market anticipates govvie deal

  • Aircraft lessors crowd to market after monster rally

    Corporate Bonds

    Aircraft lessors crowd to market after monster rally

  • People moves in brief: January 21, 2021

    People News

    People moves in brief: January 21, 2021

Global Capital

All material subject to strictly enforced copyright laws. © 2020 Euromoney Institutional Investor PLC group

About Us

  • About us
  • Contact us
  • Modern Slavery Act Transparency Statement

Connect with us

  • LinkedIn
  • @GlobalCapNews

Services

  • Advertise
  • Our partners
  • RSS
  • GlobalCapital Events
  • Events calendar
  • Social community

My Account

  • Renew
  • Subscribe
  • FAQ
  • Feedback
  • Terms and Conditions
  • Privacy Policy
  • Cookies

Quick Links

  • All League Tables
  • Bank Profiles
  • Bond Comments
  • Deals & Deal Pipelines
  • Polls and Awards
  • GlobalCapital Archive
  • Special Reports Archive