Euro investment grade bond issuance had its strongest week on record last week at €30.6bn (£24bn) in the wake of the European Central Bank’s move to buy corporate bonds as part of its QE program.
Last week saw a peak of sales on the 14 March with €7.1bn worth of issuance, with the total sales for the week overtaking the previous record of €21.05bn, which was set in the second week of May 2014, data from Dealogic shows.
The pace of corporate bond issuance, which saw a total of six deals, included a record €13.25bn deal from Belgian brewer firm AB InBev.
The sales were sparked by the recent announcement from ECB president Mario Draghi that extended the central bank’s QE programme by €20bn to €80bn a month starting from April and included non-bank corporate bonds in the asset purchase programme, along with government bonds.
As a result, experts anticipate the corporate bond market will be the clear winner from the new measures.
At the time of the announcement, the ECB didn’t say how many corporate bonds it will buy, but commentators say it could be up to €5bn a month.
Pimco head of credit portfolio management for EMEA Eve Tournier, who estimates the universe of eligible bonds is about €500bn, says the ECB purchases are likely to significantly compress credit spreads and reduce volatility.
He says: “This could push investors further along the risk spectrum into longer-maturity, lower-quality assets and outside the low-yielding eurozone.
“In the long term, absolute returns in European investment grade credit may be limited by the ECB’s actions. However, in the shorter term, spread compression should be positive. Furthermore, investors may benefit by moving into higher-yielding assets, such as European high-yield, bank capital and US corporates.”