Following signals from U.S. President Donald Trump that the Iran war is nearing an end, credit risk indicators have receded and companies are accelerating bond issuance in the European market.
According to Zhitong Finance APP, following the signal from US President Donald Trump that the Iran war is nearing an end, credit risk indicators have fallen sharply, prompting companies to accelerate bond issuance in the European market. Market data shows that bonds worth at least €21 billion (approximately $24 billion) will be priced in Europe on Tuesday, marking the busiest single trading day since the outbreak of tensions in the Middle East last week. Following the outbreak of the war, borrowers had generally delayed entering the market due to soaring credit risks, resulting in a backlog of bond issuance transactions. This market reaction reflects the concentrated release of pent-up demand.
According to insiders, Stellantis NV (STLA.US), the automaker, is advancing its first dual-currency hybrid bond issuance in euros and pounds sterling, which consists of three tranches. This marks the first hybrid bond transaction since before the outbreak of the Middle East conflict. Such high-risk debt, which combines characteristics of both debt and equity, is often regarded by credit rating agencies as "partial equity." McDonald's Corporation (MCD.US) has also simultaneously launched a €1 billion bond issuance plan.
Additionally, according to insiders, other companies such as Royal Schiphol Group NV and South Eastern Power Networks Plc are also proceeding with their bond issuance plans.
In addition to the strong performance of corporate bonds, participation by sovereign and supranational issuers has injected significant liquidity into the market. It is reported that both the European Union and the UK government launched large-scale pricing transactions on Tuesday, jointly constituting the busiest trading day in the European bond market since tensions in the Middle East heightened. Specifically, the EU plans to issue €9 billion in bonds, while the UK is launching £6.25 billion (approximately $8.4 billion) in green gilt bonds.
Trump’s remarks about the impending end of the Iran war significantly boosted global market risk appetite, driving the cost of credit default swaps (CDS) for European investment-grade corporate portfolios to record the largest single-day decline since June. Traders revealed that CDS prices for Asian investment-grade bonds fell by 4 basis points concurrently, reflecting the market’s positive response to easing geopolitical risks.
The current market focus is on the dynamics of Stellantis Group’s hybrid bond transaction. The automaker has faced continuous operational pressures in recent months, with its stock price falling by 35% this year. Antonio Filosa, the current CEO, is adjusting the strategic direction, attempting to divest unprofitable investment projects left by the previous management in the electric vehicle sector to optimize capital allocation and alleviate financial pressure.
Bond Boom
This wave of transactions has reignited what was expected to be a busy issuance month. Data shows that global financing reached a record $1.5 trillion in the first two months of this year, primarily driven by mega-deals from technology companies and robust investor demand.
Market participants previously held cautious expectations for this week, generally waiting for further clarity on the situation in the Middle East. According to the European bond issuance survey released on Friday, respondents anticipated that total bond issuance this week would range between €15 billion and €30 billion.
As market sentiment shifted, junk-rated deals also became active. Median Group became the first company since the outbreak of the conflict to issue B-class term loans. This company, which focuses on mental health and adult care, plans to extend the maturity of its euro and pound-denominated loans by three years to 2030, with relevant commitment dates set for March 12.
