Record of bond issues in a totally atypical year | Markets

In line with expectations, 2020 started with strong market activity and record emissions: in the first week alone, Spanish issuers carried out eight operations. “Between January and February, with a prospect of certain volatility, with known events such as Brexit or the elections in the United States, the main domestic issuers began to place debt, in a natural movement to face the year with a comfortable situation”, point from Banco Santander.

But with the uncertainty and confinements, the markets suffered a halt for almost two weeks, and until March 18, with the announcement of the ECB’s purchase program for emergency PEPP bonds, they did not resume activity, marking a new volume max. At the beginning of last April, Iberdrola reopened the market with a five-year green bond, and days later Naturgy, Repsol and Red Eléctrica followed.

Iberdrola reopened the market in April with a five-year green placement

JP Morgan estimates that, particularly in the credit market, spreads in secondary will end this year unchanged or slightly tighter. “Regarding volumes in primary, we expect them to be reduced, after the record year we left behind, as banks and companies start the year with a lot of liquidity.”

Bankia analysts comment that they are convinced “that we are going to witness another very active start to the year in the bond market, despite the fact that we continue with the Covid as a backdrop.”

For its part, Bankinter, which highlights its participation in the largest issuance in Iberdrola’s history, of 3,000 million hybrid bond, foresees that, as the best expectations for the economies are confirmed, safe haven assets will suffer and Those with higher risk will be favored, as well as private fixed income and more illiquid operations. “2021 will also serve to confirm the trend for green and sustainable bonds.”

Green and social

Barclays highlights the first Treasury issuance for a 30-year term last February of 15,000 million (the largest in the history of the organization and in Spain), and in which it acted as underwriter, and expects this year that the ESG, which encompass green, social and sustainable bonds continue to gain more weight and attract new issuers.

HSBC considers that, unlike other years, in 2021 there is no identified volatility component: “If it occurs, it would come from the hand of what we call unexpected components or the so-called tail risks or due to a slower than expected economic recovery. . As 2020 has taught us, tail events cannot be dismissed, but it is reassuring to think that central banks are determined to act ”.

Banks are being very conservative when it comes to providing financing, they underline from Natixis: “It will continue during the first half of 2021 and most likely during the second. Regarding the type of operations, they will be very similar to 2020 ”.

The support of fiscal stimuli, monetary measures and regulatory relaxation should act as a floor in asset prices

Javier González (BNP Paribas)

Given the environment of low rates and narrow credit spreads, Sabadell expects for this year that assets that give some profitability will be in high demand, so that an increase in long-term issues (more than 10 years) or of subordinated debt. As for news, “there will be a continuous growth of sustainable bonds.”

Manuel Puig, responsible for debt capital markets for BNP Paribas corporates for Spain and Portugal, predicts for this year that “long-term hybrid and senior debt operations will be alternatives for issuers and investors.” And Javier González, head of debt capital markets for financial entities in Spain and Portugal of the same entity, adds: “The support of fiscal stimuli, monetary measures and regulatory relaxation should act as a floor in asset prices, reducing the volatility”.

From Citi, Abraham Douek, head of fixed income for Spain and Portugal for financial entities, and Bruno Sáenz de Miera, head of fixed income for Spain and Portugal for corporate entities, consider BBVA’s issuance of 1,000 million in green format as the operation most innovative of the year. Looking ahead to 2021, they believe that the factor that could create the most instability is uncertainty about when and how the ECB will begin to reduce the liquidity it is injecting.

ING analysts have no doubt: the most successful products on the market in 2020 have been those that have had a sustainable component; Also in 2021, the financing of green projects will continue to grow in Europe with the agenda for the post-Covid economic recovery.

Forecasts for 2021

BBVA. “We believe that rates will remain low and that credit curves will remain relatively flat. And we think that issuers will take advantage of the situation to extend maturities and issue in the long part of the curve ”.

Santander. “In Spain, most of the companies did their job in 2020, but we expect interesting operations that seek to strengthen ratings through hybrid bond issues.”

Agricultural credit. “Until we can lead a normal life, start spending, travel …, the economy is not going to recover with the vaccine,” warns Pablo Lladó, director of capital markets. Looking ahead to 2021, he affirms: “Rates are so low that medium-sized companies could emerge that appeal to the capital market for the first time. They would be in demand ”.

Goldman Sachs. “Central banks will remain active in both the primary and secondary markets. We expect somewhat lower issuance volumes (15% -20%) than in 2020. This could generate a greater tightening in credit levels ”.


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