RPT-Fitch: EMEA, US issuance volumes diverge as coupons hit new low

Fri May 17, 2013 4:36am EDT

May 17 (Reuters) - (The following statement was released by the rating agency)

US and EMEA issuance trends diverged in the first quarter of 2013, according to Fitch Ratings' research. The volume of bonds sold by EMEA financial institutions and corporates dropped sharply from a year earlier, while US volumes kept up with the record pace of 2012. However, coupons continued their across-the-board decline, hitting fresh lows in both regions.

The drop in EMEA of around 41% was driven by lower issuance from financial institutions, including a 70% decline in covered bond issuance. This partly reflects particularly buoyant issuance a year earlier, when the European Central Bank's long-term refinancing operations boosted confidence in the sector. EMEA corporate issuance in Q113 also fell slightly after significant pre-funding during 2012, when new issuance ran at close to 3x aggregate maturities, although April issuance has since put 2013 ahead of 2012 in volume terms.

New issuance from US corporates and financial institutions totalled USD259.5 billion in the first quarter. The USD90.9 billion of issuance by high-grade financial institutions was the highest since early 2008. The high volumes were also probably helped by US corporates' willingness to tap bond markets to fund buybacks and other shareholder-oriented transactions, which EMEA corporates have so far been less willing to do.

Coupons continued their decline across both regions as yield-seeking investors continued to drive down risk premiums. In EMEA this enabled corporates to push out yield curves, with 30% of all new issuance having a tenor of 10 years or more, compared with 18% in 2008. In the US this trend resulted in the par-weighted average coupon of outstanding corporate bonds falling by around 10bp each quarter since early 2011.

These trends and others are highlighted in two recent reports; "EMEA Corporate Bonds: Rating and Issuance Trends," and "US Corporate Bond Market: First-Quarter 2013 Rating and Issuance Activity," available from www.fitchratings.com.

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