Now Is the Time to Sell Your Bond, Nordea Tells Corporates

(Bloomberg) -- Nordea Bank Abp, the Nordic region’s biggest bond arranger, said companies planning to sell bonds this year should act soon to avoid overpaying as Europe’s economic outlook deteriorates.

Issuers should “consider coming to market now rather than later,” Povl Bak-Jensen, head of syndication at Nordea Markets, said by phone. “Issuers should be mindful of the type of market we had toward the end of 2018. There are valid reasons why the market could widen from here again.”

Helsinki-based Nordea, which last week helped Fortum Oyj to bring Finland’s largest-ever corporate bond transaction to market, after co-arranging Stora Enso’s first Swedish krona sale in seven years, sees scope for supply to pick up for Nordic borrowers this year. That would be in line with an expected issuance increase in the wider European market as companies start to refinance debt maturing in the coming years.

Issuance Surge

Europe-wide issuance in euros for investment grade borrowers has surpassed 55 billion euros ($63 billion) this year, a 75 percent increase over the same period last year, as cash rich investors snap up new deals amid evaporating new-issue premiums. “Right now we are seeing investors benefiting from positive fund inflows and generally having the appetite to participate in the primary market.”

Fortum’s 2.5 billion-euro deal, which attracted orders in excess of 5.8 billion euros, is an illustration of the “significant change in sentiment” from the end of last year and shows investors “desire to be invested in large liquid bonds,” Bak-Jensen said.

The issuance surge in early 2019 has also been driven by the release of pent-up supply that was withheld when market conditions deteriorated at the end of last year, Antti Saha, the bank’s head of debt capital markets, said. Many who “have been sitting on the sidelines” have “started to accelerate their plans and are looking to come to market during the first quarter,” he said.

Nordea is “positively impressed” over how muted the impact of the ECB’s reduction of stimulus has been on the credit market. Even if spreads are expected to start widening, the credit has already repriced, Bak-Jensen said. That means credit “now represents a much more appealing investment opportunity” in many different rating categories, he said.

©2019 Bloomberg L.P.