European Bond Market Sees Record 496 Billion Euro Issuance

On Tuesday, the European bond market witnessed an unprecedented surge in issuance, with 28 issuers seeking a total of at least 496 billion euros in financing. This figure surpassed the previous record of 476 billion euros set earlier this year, marking a significant rebound in the market's activity following the summer lull. The issuance reflects the traditional September trend of increased financing as governments and corporations return to the market to secure funding for the remainder of the year.

The surge in issuance was primarily driven by large-scale financing from sovereign nations, notably the United Kingdom and Italy. These countries' significant borrowing needs, coupled with the continuous inflow of capital into bond funds throughout the summer, provided robust demand for new issuances. The scale and speed of this return exceeded typical expectations, with strong demand overshadowing market concerns about some countries' fiscal situations.

Sovereign bonds from the United Kingdom and Italy were the focal point of this record-breaking issuance. The United Kingdom issued 140 billion pounds in 10-year government bonds through a syndicate underwriting, setting a new record for the largest single issuance in the country's history. This issuance attracted over 1410 billion pounds in subscription orders. Meanwhile, Italy successfully issued a total of 180 billion euros in bonds, including 130 billion euros in seven-year notes and 50 billion euros in 30-year bonds. These two transactions attracted over 2180 billion euros in demand, further demonstrating the market's strong interest in high-yield sovereign debt.

High yields were a key factor attracting investors to purchase these bonds in large quantities. The success of the United Kingdom's bond issuance demonstrated the strong demand for its bond projects. The new issuance premium was less than 1.5 basis points, with international buyers accounting for 40% of the total issuance. The strong participation of international central banks in the order book was particularly encouraging, as these banks purchased the bonds as part of their reserve management.

Beyond sovereign issuers, corporations are also actively utilizing this window to raise funds. Despite borrowing costs rising from last month's lows, numerous banks and enterprises are flooding the market. The continuous inflow of investor funds into bond funds throughout the summer has provided ample "ammunition" for new bond issuances, enabling corporations to smoothly complete their financing plans. For instance, a French company successfully issued a 6.85 billion euro hybrid perpetual bond.

This bond issuance wave is not confined to Europe. Globally, other major markets are experiencing similar levels of activity. Saudi Arabia plans to issue 5-year and 10-year Islamic bonds, with orders totaling approximately 150 billion USD. This move aims to fund its budget deficit and the diversification plan. In Japan, at least seven companies have initiated dollar-denominated bond issuances, with this week expected to be the busiest for global debt issuance this year. Japanese issuers are on track to surpass 100 billion USD in dollar and euro bond issuances for the year.