Europe Debt Risk Falls as Investors Clamor for Higher Yields
2021-02-05 11:02:11.154 GMT
By Laura Benitez
(Bloomberg) — Credit markets in Europe are rounding out
another strong week as investors’ hunt for yield intensifies.
The cost of insuring high-yield debt fell for a fifth day,
bringing the weekly decline to 29 basis points, the most in nine
weeks. Risk-on sentiment has been underpinned by progress in
vaccination campaigns to fight the coronavirus, strong corporate
profits, central bank support and buoyant global stocks, which
are hovering near all-time highs.
German plastic packaging firm Kloeckner Pentaplast GmbH
secured yields as low as 4.25% on its bond refinancing on
Friday. The company’s bonds were bid at less than half of their
face value in December, data compiled by Bloomberg show.
“The pricing of the new Kloeckner Pentaplast notes says a
lot about investors’ appetite for fresh paper and risks,”
Benjamin Sabahi, head of research at Spread Research in Lyon,
France, wrote in a note to clients on Friday.
Read more: Global Credit Rally Is Leaving Some Debt-Laden
Borrowers Behind
Sales of junk-rated bonds reached around 2.3 billion euros
($2.75 billion) this week, ahead of what’s expected to be a
strong month for sector issuance. January’s high-yield bond
sales totaled 11.3 billion euros, making it one of the busiest
January’s on record.
Borrowers from the lowest end of the junk spectrum have
sold about 2 billion euros of CCC-rated debt so far this year,
as investors opt to take on extra risk in exchange for higher
returns.
Total issuance in Europe is set to surpass 40 billion euros
for a fifth week, the lowest weekly volume of the year,
according to data compiled by Bloomberg. Sales will close the
week at 40.2 billion euros, with three deals set to price on
Friday.
Still, Europe’s junk bond market could face its biggest
test in the coming weeks. The buyout of U.K. supermarket chain
Asda Group Ltd. by brothers Zuber and Mohsin Issa and TDR
Capital will include the largest sterling corporate bond sale on
record.