European companies accelerate debt issues thanks to the ECB

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The ECB does not rule out using the OMT program that would allow unlimited sovereign debt purchases





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The ECB is dwarfing economic deterioration in the debt market.


European companies have accelerated debt issues in recent days due to the financing needs that arise from the slowdown in economic activity as a result of the coronavirus pandemic and taking advantage of the support that the extension of the purchasing program has offered to demand. of sovereign and corporate bonds in 750,000 million euros from the European Central Bank (ECB).

The eurozone corporate debt market closed last week with the most activity since the beginning of the year. Loans totaled 74.5 billion, compared to 90 billion at the start of 2020, “which was the most active week ever recorded,” recalls Alex Larisch, executive director of operations in Spain and Portugal at Natixis.

“Spreads in the credit market narrowed across the eurozone across the last few days of the week, especially since the ECB’s PEPP (Emergency Purchase Program) legal text was published, leaving little doubt as to how serious That is about it, “continues the expert, who believes that thanks to this” we get to see some tranquility. “

“I don’t see any reason for a decline in the primary markets in Europe or the United States at the moment,” agrees Alex Eventon, operator of Resco AM, in statements collected by Bloomberg. For now, the ECB has managed to eclipse the strong economic deterioration of the eurozone, which is already evident in leading indicators such as the March PMI indices.

25,000 of debt from Spain, Italy, Germany and France

The support of monetary policy is also evident in the sovereign debt market. Last week, Spain took advantage of the situation to raise more than 10 billion euros with its first syndicated issue in seven years since 2014 -the second of its kind in 2020- “to increase the degree of compliance with its program for this year”, According to sources from the Ministry of Economic Affairs and Digital Transformation, and to avoid increasing the cost of financing in the coming months in a context that will require more debt to face the government’s measures, which seek to counter the impact of the pandemic on the activity, and before the political blockade in the European Council of a common fiscal solution, such as the so-called coronabonos.

For this week, the Treasury itself, and the other three large issuers of the eurozone, Italy, Germany and France, are expected to search for 25,000 million in the debt market. The Spanish risk premium (the differential between what is required of the 10-year bond and that of Germany) fell to 93 points last week. Although it has already exceeded 100 integers, it is still far from the 160 it reached on March 18, before the ECB announced its emergency program.

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