In line with expectations, 2020 began with strong market activity and record emissions, with Spanish issuers conducting eight operations in the first week alone. “Between January and February, with the prospect of some volatility, with well-known events such as Brexit or the elections in the United States, the major domestic issuers began to post debt, in a natural movement to head every year with a comfortable situation. to offer “, point of Banco Santander.
But uncertainty and constraints brought markets to a standstill for almost two weeks, and until March 18, with the announcement of the ECB’s emergency PEPP bond buy-back program, they did not resume activity, marking a new maximum volume. Iberdrola reopened the market in early April with a five-year green bond, followed days later by Naturgy, Repsol and Red Eléctrica.
Iberdrola reopened the market in April with a five-year green placement
JP Morgan estimates that, especially in the credit market, secondary spreads will end unchanged or slightly tighter this year. “In terms of volumes in the primary sector, we expect them to be cut after the record year we left behind, as banks and companies start the year with a lot of liquidity.”
Bankia analysts say they are confident “that we will witness another very active start to the year in the bond market, despite continuing with Covid as a backdrop.”
Bankinter, for its part, highlighting its participation in the largest issue in Iberdrola’s history of 3,000 million hybrid bonds, expects that as the best expectations for the economies are confirmed, safe-haven assets will suffer and those at higher risk will be preferred. , as well as private fixed income and more illiquid operations. “2021 will also serve to confirm the trend towards green and sustainable bonds.”
Green and social
Barclays highlights the first 30-year treasury bill issued last February of 15,000 million (the largest in the organization’s history and in Spain), and in which it acted as an underwriter, and hopes for this year that the ESG, which it Green, social and sustainable bonds continue to gain weight and attract new issuers.
HSBC believes that, unlike in other years, there is no identified component of volatility in 2021: “If it does, it would come from what we call unexpected components or the so-called tail risks or from a slower economic recovery than expected. 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 very conservative when it comes to providing funding, they underline from Natixis: “It will continue in the first half of 2021 and most likely in the second. As for the type of operations, they will be very similar to 2020 ”.
The support of fiscal stimulus, monetary measures and regulatory relaxation should act as a floor for asset prices
Javier González (BNP Paribas)
Given the environment of low interest rates and tight credit spreads, Sabadell expects for this year that there will be high demand for assets that deliver some profitability, so there will be an increase in long-term issues (more than 10 years) or in subordinated debt. As for news, “there will be continuous growth in sustainable bonds.”
Manuel Puig, responsible for it debt capital markets for BNP Paribas corporates for Spain and Portugal, predicts for this year that “hybrid and senior debt transactions will be long-term alternatives for issuers and investors.” And Javier González, head of debt capital markets for financial entities in Spain and Portugal from the same entity, adds, “The support of fiscal stimulus, monetary measures and regulatory relaxation should act as a floor in asset prices, reducing volatility. reduced “.
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, consider BBVA’s issuance of 1,000 million in green form as the most innovative operation of the year. Looking ahead to 2021, they believe that the factor that could cause the most instability is uncertainty about when and how the ECB will start reducing the liquidity it injects.
ING analysts have no doubts: the most successful products on the market in 2020 will be those with a sustainable component; Financing for green projects in Europe will continue to grow in 2021 with the agenda for the post-Covid economic recovery.
Predictions for 2021
BBVA. “We think interest rates will remain low and credit curves will remain relatively flat. And we think issuers will take advantage of the situation to extend and issue maturities in the long end of the curve ”.
Santander. “In Spain, most companies will have done their job in 2020, but we expect interesting operations that aim to strengthen ratings through hybrid bonds.”
Agricultural credit. “Until we can lead a normal life, spend money, travel … the economy will not recover with the vaccine,” warns Pablo Lladó, director of capital markets. Looking ahead to 2021, he confirms: “The rates are so low that medium-sized companies can emerge that are calling on the capital market for the first time. It would be in great demand ”.
Goldman Sachs. “Central banks will remain active in both the primary and secondary markets. We expect slightly lower issuance volumes (15% -20%) than in 2020. This could lead to a greater tightening of credit levels”.