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AFME Government Bond Data Report Q1 2020
29 Jun 2020
AFME is pleased to circulate itsQ1 2020 Government Bond Data Report. This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU27+UK). Report highlights include: The highest quarterly traded volume since Q1 2017 was observed during Q1 2020, according to TRAX The average bid-cover ratio (demand/amount allocated) was 2.16 in 1Q20, an increase of 2.2% (QoQ) from 4Q19 and equal to 1Q19 (YoY). During 1Q20 there were 4 long-term credit rating upgrades for European countries and 1 downgrade, bringing the year to date total to 4 upgrades and 3 downgrades. (There have been 2 further downgrades in 2020 to date). All downgrades in 2020 YtD have been linked to the impact of the Covid-19 crisis. Record breaking tap issuance raises outstanding amount of European sovereign green bonds to EUR 46.8 bn, after both the French and Dutch green bonds were re-opened, adding an additional volume of EUR 4.6 bn and EUR 1.4 bn respectively. There has been a sustained repricing of sovereign bond markets amid high volatility due to the Coronavirus pandemic. After a volatile Q1, Eurozone 10Y spot yields rebounded from record multi-year lows, Italian 5Y CDS show moderate improvement while Eurozone 1Y market-implied inflation expectations continued to fall
AFME European High Yield and Leveraged Loan Report: Q1 2020
26 Jun 2020
The Report contains European leveraged finance market trends for the first quarter of 2020, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance(leveraged loans and high yield bonds) accumulated €68.0 billion in proceeds 1Q’20, a 15.3% decrease from €80.3 billion in 4Q’19 but an increase from €46.4 billion in 1Q’19. This quarterly decrease was driven mainly by a decrease in leveraged loan issuance. Primary high yield issuancetotaled €29.2 billion on 71 deals in 1Q’20, a 13.9% decrease in volume from €33.9 billion on 67 deals in 4Q’19 and a 70.7% increase from €17.1 billion on 40 deals in 1Q’19. The proportion of USD-denominated issuance decreased to 24.2% of all issuance in 1Q’20, down from 26.0% in 4Q’19 and from 34.8% in 1Q’19. The leading use of proceeds for high yield bonds issuance in 1Q’20 were general corporate purposes with €13.2 billion. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €38.8 billion on 73 deals in 1Q’20, down 16.3% from €46.4 billion on 67 deals in 4Q’19 and a 32.3% increase from €29.3 billion on 60 deals in 1Q’19. 59.4% of deals financed in the 1Q’20 were issued for refinancing and/or repayment of debt, down from 67.9% in 4Q’19 but up from 39.9% in 1Q’19. Pricing spreads for institutional loans tightened by 26 basis points (bps) q-o-q and by 46 bps y-o-y. Spreads for pro rata loans widened by 7 bps q-o-q and by 25 bps y-o-y. Credit quality: S&P reported the trailing 12-month speculative-grade default rate at 2.4% as of March 2020, an increase from 2.2% in December 2019 and from 2.0% in March 2019. Moody’s reported the trailing 12-month speculative-grade default rate at 1.7% in March 2020, up from 1.5% in December 2019 and from 1.0% in March 2019. Four bond-related defaults were reported in the first quarter of 2020 by S&P and Moody’s, three in developed market Europe and one in emerging market Europe. In the first two months of 2Q’20, 11 bond-related defaults were reported by S&P and Moody’s, with missed interest payment as the most common reason for default. According to Moody’s, downgrades exceeded upgrades in Europe (76 downgrades to 4 upgrades), a worse ratio than 34 downgrades to 6 upgrades in 4Q’19 and than 16 downgrades to 10 upgrades in 1Q’19.
AFME Prudential Data Report Q1 2020
22 Jun 2020
This report collates timely information on EU GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 31 March 2020. It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as of June 2020. Among the main findings of this report: European systemically important banks (GSIBs) reported in 1Q20 a decline in their capital ratios on the back of increased balance sheet use to support the COVID-19 economic recovery. Total assets expanded 10% QoQ, exposure measure increased 6.7% QoQ while RWAs rose 2% QoQ. European GSIBs end-point CET1 ratio decreased to 13.4% in 1Q20, from 13.6% in 4Q19. End-point Tier 1 ratios decreased to 15.0% in 1Q20, from 15.3% in 4Q19. End-point Leverage ratios (LR) decreased to 4.6% in 1Q20 from 4.9% in 4Q19. Liquidity Coverage Ratio (LCR) increased to 142.1% in 1Q20, from 140.4% in 4Q19, driven by a c18% increase in cash and central bank deposits. TLAC ratio stood at 25.7% relative to RWAs and 8.0% as a percentage of leverage exposure. Contingent Convertibles (CoCo): CoCo issuance was abruptly interrupted during the months of March and April due to the sharp increase in CoCo risk premia as a result of the market turbulence generated by the COVID-19 outbreak. The CoCo market has recently reopened with the issuance of €3.8bn in proceeds since May-20. These notes, however, have been issued with higher coupon rates compared to those issued in 1Q20 (5.8% in 2Q20 vs. 4.6% in 1Q20 for fixed rate bonds). BOX: Pages 21-23 provide a summary of the recently approved targeted changes to the Capital Requirements Regulation (CRR) – “CRR quick fix” The CRR quick fix will complement supervisory measures to ensure that banks have sufficient capacity going forward, although this should be kept under review given the unprecedented scale of the present crisis.
AFME Securitisation Data Report Q1 2020
17 Jun 2020
AFME is pleased to circulate its Q1 2020 Securitisation Data Report. Please note that there have been some changes in sources used and methodology; these have been noted in the Report. A full statement regarding our methodology is available here. Main findings: In Q1 2020, EUR 30.1 billion of securitised product was issued in Europe, a decrease of 61.7% from Q4 2019 and a decrease of 2.3% from Q1 2019. Of the EUR 30.1 billion issued, EUR 21.4 billion was placed, representing 71.1% of issuance, compared to the 46.1% of issuance in Q4 2019 and the 63.3% of issuance in Q1 2019. Outstanding volumes (excluding outstanding CLOs) fell slightly to EUR 0.99 trillion outstanding at the end of Q1 2020, a decrease of 1.8% QoQ and 0.02% YoY. Credit Quality: In Europe, upgrades outpaced downgrades in Q1 2020, with upgrades concentrated in RMBS, both conforming and non-conforming. Regulatory update: The implementation of the Level 2 legislation under the STS Framework is still progressing. However, some of the key elements of the Securitisation Framework are still pending finalisation. Included in this report is a breakdown of the Securitisation Regulation and CRR Level 2 mandates by article number and status by date of completion. On 8 April the EC launched a consultation on its Renewed Sustainable Finance Strategy which includes a section on green securitisation. Among other questions, the EC is requesting feedback on the need for a dedicated regulatory and prudential framework for green securitisation. AFME is preparing its response.
Securitisation Data Snapshot: Q1 2020
6 May 2020
AFME is pleased to circulate the European Securitisation Data Snapshot for Q1 2020. Key highlights: Q1 2020 European Issuance In Q1 2020, EUR 30.1 bn of securitised product was issued in Europe, a decrease of 61.7% from Q4 2019 (EUR 78.6 bn) and a decrease of 2.3% from Q1 2019 (EUR 30.8 bn) Of this, EUR 21.4 bn was placed, representing 71.1% of the total, compared to EUR 36.2 bn placed in Q4 2019 (representing 46.1% of EUR 78.6 bn) and EUR 19.5 bn placed in Q1 2019 (representing 63.3% of EUR 30.8 bn) In Q1 2020, UK Residential Mortgage-Backed Securities (RMBS) led placed totals followed by Pan-European CLOs and Dutch RMBS. o UK RMBS increased from EUR 6.6 bn in Q4 2019 to EUR 7.3 bn in Q1 2020 o Pan-European CLOs decreased from EUR 8.5 in Q4 2019 to EUR 5.4 bn in Q1 2020 o Dutch RMBS increased from EUR 0.7 bn in Q4 2019 to EUR 1.9 bn in Q1 2020
Initial Impact of COVID-19 on European Capital Markets
19 Apr 2020
AFME has published a new research note on the“Initial impact of COVID-19 on Europe’s capital markets”.The report analyses the significant impact that Covid-19 has had across all major capital markets sectors including: equities (IPOs and secondary), fixed income primary and secondary (sovereigns, corporates, securitisation, high yield, leveraged finance), FX, derivatives, and banks. The report also highlights AFME’s initiatives to support markets during the COVID-19 crisis. Key findings: European capital markets have continued to operate well following the outbreak of COVID-19, with liquidity ranging from very good to mixed, depending on the sector.In fact, there have been record volumes of new issuance in certain sectors. Issuance of investment grade corporate bonds surpassed EUR 50bnin the first week of April; this amount was also the highest weekly amount ever issued in Europe.French companies have been particularly active in this respect.This is remarkable, given that many, if not most, financial market participants are working remotely. Markets are more volatile than a few months ago, which has made it costly for some companies to list through IPOs. IPO issuance on European exchanges has declined 83%compared to a year ago. Markets have been playing their role in providing liquidity, price formation, and timely clearing and settlement procedures, contributing to capital allocation and helping investors manage their portfolios.Equity average daily trading has surged 94%year on year in March-20,corporate bond trading increased 31% year on year in Q1 2020,andFX trading rose 61% year on yearin March-20. The rapid increase in securities trading and post-trade activity has been carried out without any major disruption from a business continuity perspective. Securitisation secondary markets have suffered disproportionate reductions in liquiditydue to central bank support which is more limited in scope and slower and more difficult to access than for other fixed income sectors. Banks operating in Europe are well-positioned from a solvency and liquidityperspective to support households and businesses during this period of abnormal economic pressure.
Prudential Data Report: Q4 2019
9 Apr 2020
This report collates timely information on EU GSIBs’ prudential capital, leverage and liquidity ratios with updated statisticsas at 31 December 2019. It also illustrates the recent performance of the debt and contingent convertibles(CoCo) markets and the funding structure for banks in Europe as of end of March 2020. Among the main findings of this report: EU systemically important banks* (EU GSIBs) reported in 4Q19 the highest quarterly solvency ratios in records (since our records began in 2013). Amidst the current COVID-19 global pandemic, European banks are significantly well positioned from a solvency and liquidity perspective to continue to support the economy and facilitate risk management. European banks have consistently built up their capital and liquidity buffers over the last years through a combination of internal restructuring, profit generation and external capital raising. EU GSIBs end-point CET1 ratio increased to 13.6% in 4Q19, from 13.1% in 4Q18. End-point Tier 1 ratios increased to 15.3% in 4Q19, from 14.8% in 4Q18. End-point Leverage ratios (LR) increased to 4.9% in 4Q19 from 4.8% in 4Q18. Liquidity Coverage Ratio (LCR) declined to 140.4% on a weighted average basis in 4Q19, from 141.3% in 4Q18. TLAC ratio stood at 26.1% relative to RWAs and 8.4% as a percentage of leverage exposure. The amount of new capital raised during 2019 by EU banks totalled €28.1 bn, €4bn above the amount raised in 2018. The amount of fresh capital raised was almost exclusively in the form of contingent convertible (CoCo) bonds. CoCo risk premia (option-adjusted spreads) has increased by 365bps in 2020YtD, from record lows observed during the first two months of the year. Markets are likely pricing the potential repercussions COVID-19 on banks’ future earnings. The increase in CoCo spreads was mirrored by a sudden stop in CoCo issuance by European banks. BOX: Pages 22-29 provide an overview of the most recent COVID-19 regulatory decisions in Markets and Prudential dossiers and AFME responses where relevant. COVID-19 has had significant implications for AFME members globally with many having to focus resources on managing business continuity issues. AFME is working with official sector authorities to ensure that its members can continue to support their clients during these challenging times.
European High Yield and Leveraged Loan Report: Q4 2019
24 Mar 2020
The Report contains European leveraged finance market trends for the fourth quarter of 2019, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) increased to €80.3 billion in 4Q’19, a 4.9% increase from €76.5 billion in 3Q’19 and an over twofold increase from €35.2 billion in 4Q’18. Primary high yield issuance totaled €33.9 billion on 67 deals in 4Q’19, a 8.4% increase in volume from €31.3 billion on 58 deals in 3Q’19 and an almost fourfold increase from €6.9 billion on 22 deals in 4Q’18. The proportion of USD-denominated issuance decreased to 26.0% of all issuance in 4Q’19, down from 31.1% in 3Q’19 but up from only 8.8% in 4Q’18. The leading use of proceeds for high yield bonds issuance in 4Q’19 were general corporate purposes with €17.7 billion. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €46.4 billion on 67 deals in the fourth quarter of 2019, up 2.5% in volume from €45.2 billion on 69 deals in 3Q’19 and a 64.1% increase from €28.2 billion on 66 deals in 4Q’18. Over two-thirds (67.9%) of deals financed in the fourth quarter of 2019 were issued for refinancing and/or repayment of debt, up from 47.9% in 3Q’19 and up from 66.7% in 4Q’18. Pricing spreads for institutional loans tightened by 12 basis points (bps) q-o-q but widened by 10 bps y-o-y. Spreads for pro rata loans widened by 47 bps q-o-q and by 38 bps y-o-y. Credit quality: S&P reported the trailing 12-month speculative-grade default rate at 2.2% as of December 2019, an increase from 2.1% in September 2019 and from 2.0% in December 2018. Moody’s reported the trailing 12-month speculative-grade default rate at 1.5% in December 2019, up slightly from 1.4% in September 2019 but down from 2.0% in December 2018. Six bond-related defaults were reported in the fourth quarter of 2019 by Standard and Poor’s and Moody’s, all in developed market Europe. The most common reason for default in 4Q’19 was distressed exchange. According to S&P, downgrades exceeded upgrades in developed market Europe (36 downgrades to 19 upgrades), a slightly better ratio than 36 downgrades to 14 upgrades in 3Q’19 but worse than 39 downgrades to 27 upgrades in 4Q’18. Likewise, according to Moody’s, in 4Q’19 downgrades exceeded upgrades in Europe (34 downgrades and 6 upgrades), a slightly better ratio than 34 downgrades and 1 upgrade in 3Q’19 but significantly worse than 31 downgrades and 16 upgrades in 4Q’18.
Government Bond Data Report Q4 2019
19 Mar 2020
This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU27 and the United Kingdom). Report highlights include: The highest average annual traded volume since 2015 was observed during the year of 2019, according to MarketAxess The average bid-cover ratio (demand/amount allocated) was 2.13 in 4Q19, a slight decrease of -0.49% (YoY) from 4Q18 and a -0.73% decrease QoQ from 3Q19. During 4Q19 there were 4 long-term credit rating upgrades for EU countries (following 3 in 3Q19, 2 in 2Q19 and 5 in 1Q19) and no downgrades, bringing the year to date total to 14 upgrades and no downgrades. There have been 4 further upgrades in 2020 to date. Outstanding amount of EU green sovereign bonds surpasses EUR 40bn, after the Irish green bond was re-opened for an additional EUR 2bn of volume in a tap issuance. There has been continuous improvement in EU credit quality. Particularly of Central and Eastern European countries, where Latvia and Lithuania have been assigned the highest credit rating in both countries’ history. There has been a recent repricing of sovereign bond markets due to the Covid-19 pandemic. Eurozone 1Y market-implied inflation expectations fall to 5-year low, Eurozone (AAA) 10Y spot yield fall to lowest value on record and Italian 5Y credit default swaps reach 5-month high.
AFME Securitisation Data Report: Q3 2019
5 Feb 2020
AFME is pleased to circulate its Q3 2019 Securitisation Data Report Main findings: In Q3 2019, EUR 40.4 billion of securitised product was issued in Europe, a decrease of 33.4% from Q2 2019 and a decrease of 25.8% from Q3 2018. Of the EUR 40.4 billion issued, EUR 31.1 billion was placed, representing 76.9% of issuance, compared to the 45.6% of issuance in Q2 2019 and the 55.8% of issuance in Q3 2018. Outstanding volumes fell slightly to EUR 1.19 trillion outstanding at the end of Q3 2019, a decrease of 4.4% QoQ and 0.5% YoY. Credit Quality: In Europe, upgrades outpaced downgrades in Q3 2019, with upgrades concentrated in RMBS, both conforming and non-conforming. Regulatory update: The implementation of the Level 2 legislation under the STS Framework is still progressing. However, some of the key elements of the Securitisation Framework are still pending the finalisation, such as the RTS on Risk Retention (expected adoption by the EC later in 2020). In response to the increasing regulatory and policy focus on Sustainable Finance (including the environmental aspects) in September 2019 AFME published a position paper on Green Securitisation in which we highlighted the key voluntary principles which policymakers and market participants should support to help propose green securitisation.