Europe Debt Demand Is Already at Half a Trillion Dollars in 2023
Demand for Europe’s debt sales has topped half a trillion euros already this year as investors seek to put money to work in bonds offering some of the highest yields in years.
Investors have bid €530 billion ($570 billion) — more than three times the €168 billion of issuance in Europe’s syndicated primary market this month through Wednesday, according to data compiled by Bloomberg. The tally includes all publicly-syndicated company and government bond offerings, with demand running well above the average for the prior five years to the same point.
“Fixed income is finally back for investors and investment-grade is in the sweet spot,” said Henrietta Pacquement, head of the global fixed income team at Allspring Global Investments. “There’s a fair amount of appetite for investment-grade credit, as well as cash that needs to get invested.”
Debt from borrowers like German utility E.On SE and Italy’s Enel SpA is in demand amid a stabilization in global markets following a torrid 2022 that saw the worst annual returns on record for euro high-grade credit. Investors can now get an average yield of more than 4% when they buy euro-denominated debt of blue-chip firms — almost seven times the yield offered a year ago and close to the highest payout in more than a decade, based on Bloomberg indexes.
It’s also helping that portfolio managers have a big pool of cash to chase these lofty yields. European high-grade funds have been drawing investor inflows for 11 consecutive weeks, based on EPFR Global data cited by Bank of America Corp. strategists.
And European markets in general have come back into favor with investors at the start of 2023, after a milder-than-expected winter and some better inflation data in the region soothed fears of a painful recession.