Report highlights include: EU Member States and the UK issued EUR 954 bn in bonds and bills throughout 2Q24, which represents an increase of 5.7% (QoQ) compared to 1Q24, and an increase of 7.3% (YoY) compared to 2Q23. Record trading volumes continued in European (EU+UK) government bonds during Q2 2024, according to MarketAxess TraX, with trading increasing 9% (YoY) and decreasing 12% (QoQ). In H1 2024, average daily trading volumes were up 13%, compared to H1 2023, and up 24% compared to H1 2022. Average daily trading volumes in 2024 to date are the highest in the past six years following consistently high trading volumes reported since 2022. Outstanding amount of European ESG government bonds reached EUR 502 bn during 2Q24. Volumes were driven by new green bonds issued by Italy (EUR 9.0 bn), Germany (EUR 4.0 bn), Austria (EUR 2.3 bn) and the European Commission (EUR 4.2 bn). The pace of quarterly growth in the outstanding volume of ESG sovereign bonds slowed to 5.5% during 2Q24, falling from 7.8% growth in 1Q24. During 2Q24 there were 4 long-term credit rating downgrades for European countries and 2 upgrades. This follows 1 upgrade and no downgrades in 1Q24, bringing the 2024 year-to-date total to 4 upgrades and 4 downgrades (there was 1 further upgrade and no downgrades in 3Q24). Cyprus continued to increase the quality of its credit profile throughout 2024, with two of the main credit rating agencies upgrading the credit rating of the country in Q2 2024. There were 2 entries and 1 exit in European primary dealership from January to October 2024. Changes in primary dealership from January to October 2024 affected sovereign debt markets in Italy, Slovenia, and Sweden. After the most recent changes and as of September 2024, the median number of primary dealers across European countries increased to 18, which represents the highest median since May 2018. The average bid-cover ratio (demand/amount allocated) was 2.50 in 2Q24, an increase of 3.3% (QoQ) from 1Q24 and an increase of 14.2% from 2Q23 (YoY).

AFME is pleased to circulate its Prudential quarterly data report for the second quarter of 2024. The report presents the latest data on prudential capital, leverage, and liquidity ratios for European GSIBs, and illustrates the performance of debt and contingent convertible (CoCo) securities issued by European banks. Among the main findings of this report: The end-point CET1 ratio of European GSIBs slightly increased of 3bps to 14.21% in Q2 2024: The increase was primarily due to organic capital growth and movements in RWAs, while FX translation and shareholder distributions reduced the ratio (respectively by 9bps and 25bps). TLAC capital covered 32.5% of RWA and 9.7% of exposure measure in Q2 2024, a QoQ increase from 31.78% of RWAs and 9.59% of the exposure measure. AT1 bond issuance recovery speeds up: Following the March 2023 AT1 market turbulence episode, issuance started to recover in June 2023 and gradually increased during the rest of 2023. After a limited issuance of AT1 instruments in the first quarter, Q2 2024 shows stronger volumes (€6bn in proceeds), marking an increase of 392% YoY and 30% QoQ. AT1 risk premia stable to pre-turbulence levels, standing at 362bps, 34bps below the levels observed prior the turbulence episode in March 2023. Updates in the Basel III package implementation in EU, UK and US In the EU, the European Commission has just adopted a delegated act to postpone the implementation of the market risk prudential framework, the "Fundamental Review of Trading Book" or FRTB by one year, while the CRR3 will enter into application from 1 January 2025. In the UK, the implementation of the Basel 3.1 has been postponed to 1 January 2026, following the publication of the final rules that indicate that Tier 1 capital requirements for UK firms will increase by less than 1% after the transitional arrangements conclude. In the US, the timeline for the implementation of the Basel 3 endgameremains uncertain but will likely be delayed further due to the expected publication of the re-proposal.

AFME is pleased to circulate its European High Yield and Leveraged Loan quarterly data report for the second quarter of 2024. The report provides detailed data and analysis on the issuance and credit performance for the high yield and leveraged loan markets. Among the main findings of this report: European leveraged finance issuance(leveraged loans and high yield bonds) reached €120bn in proceeds in 2024 Q2, a 60% increase compared to the previous year. The positive trend is due to a stable environment with lower interest rates and tighter spreads, signaling a shift between public and private markets. High yield bond issuancetotaled€47.4bn in Q2 2024, a 137% increase from Q2 2023, showing a full recover after the pandemic drop of issuances. High yield bond proceeds were mainly used for recapitalization (77% of the total), or for repayment of debt and refinancing (12.6% of the total), and general corporate purposes (9.24%). While no proceeds were allocated to leveraged buyouts (LBOs) and M&A in the first quarter of the year, in 2024 Q2 a small amount of high yield instruments were used to finance these activities. As in the previous quarter, the 62.1% of the high yield market by outstanding amount is represented by the financials, consumer discretionary, and communicationssectors. Leveraged loan origination stoodat €72.8bn, a decrease compared to the previous quarter (€88.5bn), but a 33% YoY increase from Q2 2023. Institutional spreads (3-month rolling average) showed consistent stability compared to the previous quarter, reaching 395bps in June 2024. Pro-rata spreads consistently remained below institutional spreads, and have dropped from 332bps in April 2024 to 292bps in June 2024. The Healthcare sector continues to lead by loan origination amount, while the computers & electronics has significantly grown in the latest quarter and, together with Professional Services, represented 40% of the Q2 2024 issued amount. Credit Quality: S&P reported the trailing 12-month speculative-grade bond default rate at 4.6% in June 2024, up from the 4.1% reported in March. Conversely, Moody’s and Fitch reported a rate of 3.5% and 3.6% respectively, relatively unchanged from the previous quarter's value. Moody's and S&P reported 11 bond defaults during Q2 2024, that were mainly due to distressed exchanges and missed payments.

Equity underwriting on European exchanges rose 22%YoY in H1 2024 on the back of a moderate increase in secondary equity offerings (14%) and a large annual increase in IPOs. Initial Public Offerings (IPOs) saw a large percentage increase of 385% YoY which, however, represented a small amount of only €11.5bn raised in H1 2024, below the H1 average of €16bn observed since 2010. Mergers and Acquisitions (M&A) declined when measured as completed value (-12%) but rose when measured as announced value (45%), which may anticipate a robust outlook for European M&A. Average daily equity trading on European main markets and MTFs rose 5% YoY. Recent trends show a deterioration in market liquidity as measured by turnover ratio (turnover value/market cap), with a decline from c150% in 2018 to 125% in 2024. DVC Update: The Double Volume Cap (DVC) mechanism seeks to limit equity trading under the reference price waiver and the negotiated transaction waiver on EU venues. According to ESMA, the number of instruments suspended under the DVC has roughly stabilised since March 2023, with 216 suspended instruments (177 at EU Level and 39 at TV level) as of September 2024.

AFME is pleased to circulate its European ESG Finance quarterly data report for the second quarter of 2024. The report provides detailed data and analysis on the growing Sustainable Finance market in Europe. The report also gives an overview of the near-term regulatory initiatives in the sector. Among the main findings of this report: ESG bond and loan issuance decelerates during Q2'24 after record first quarter: ESG bond and loan issuance totalled €158bn, a 14% decrease from Q2 2023 (YoY) and a 31% decrease from Q1 2024 (QoQ) With the exception of ESG securitisation, all other sustainable instruments covered in this report exhibited a quarterly issuance decline Sustainability-linked bonds continued a further decline on a quarterly and Year-to-date basis. The cumulative amount issued the first half of the year is the lowest observed since 2020. German issuers led in Q1 2024 by total ESG bond and loan issuance, closely followed by French issuers. Notably, c. 50% of sustainability-linked bonds was originated in Italy and a half of ESG bonds were issued in France or Germany. The share of ESG bonds in total bond issuance in Europe has plateaued, or even decreased since 2021: ESG bond issuance, including ESG-labelled, sustainability-linked and transition bonds, represented 13% of total European bond issuance during 2024 YtD, a lower proportion from 14% in 2023 and 18% in 2022. On a year-to-date basis, European green bonds reached the highest H1 issued amount on records. However, relative to the total European bond issued amount, its proportion has continued at c10% since 2021. Declining pool of ESG Assets Under Management (AuM) notwithstanding net quarterly inflows: Lower asset prices led to a 1.7% decrease (QoQ) in global ESG funds, reaching a total amount of $USD 9.7tn despite quarterly net inflows for $USD 37.5 bn.

AFME is pleased to circulate the European Securitisation Data Snapshot for Q2 2024. Key highlights: Q2 2024 European Issuance In Q2 2024, EUR 66.6 bn of securitised product was issued in Europe, a decrease of 1.4% from Q1 2024 (EUR 67.6 bn) and a decrease of 30.4% from Q2 2023 (EUR 95.7 bn). Of this, EUR 45.4 bn was placed, representing 68.2% of the total, compared to EUR 32.0 bn placed in Q1 2024 (representing 47.4% of EUR 67.6 bn) and EUR 20.7 bn placed in Q2 2023 (representing 21.6% of EUR 95.7 bn). In Q2 2024, Pan-European CLOs led placed totals, followed by UK RMBS and German Auto ABS: Pan-European CLOs increased from EUR 11.6 bn in Q1 2024 to EUR 13.9 bn in Q2 2024; UK RMBS increased from EUR 9.2 bn in Q1 2024 to EUR 10.6 bn in Q2 2024; and German Auto ABS increased from EUR 3.1 bn in Q1 2024 to EUR 3.2 bn in Q2 2024. H1 Trends in European Placed Issuance and Geographic Breakdown In 2024H1, EUR 26.8 bn of placed securitised product was issued in the EU, EUR 25.2 bn in the UK and EUR 25.5 bn in Pan European CLOs, an annual increase of 74.7% (from EUR 15.2 bn), 91.3% (from EUR 13.2 bn) and 123.7% (from EUR 11.4 bn) respectively, compared to 2023H1 However, since 2015, sustained growth in H1 issuance has remained low, with placed securitised volumes issued in the first half of the year in the EU increasing 3.2% on average in 2020-2024 compared to 2015-2019. Placed H1 issuance decreased by 7.9% in the UK and 6.0% for Pan European CLOs across the same period (namely 2020 – 2024). Consequently, the issuance trend in the EU (ex-CLOs) over the last 10 years is of marginal growth, as shown by the corresponding chart. In the UK, the most recent large increase in 2024H1 was partially driven by refinancings, specifically within the UK NC RMBS segment, where refinancings made up 73% (EUR 7.7 bn) of issued volumes in 2024H1.

Report highlights include: EU Member States and the UK issued EUR 1,019.3 bn in bonds and bills throughout 1Q24, which represents an increase of 7.4% (YoY) compared to 1Q23. The non-Eurozone countries had the largest increase in total (bond and bill) issuance during 1Q24— UK gilts gross issuance rose 34% YoY compared to 1Q23. Record trading volumes in European (EU+UK) government bonds during Q1 2024, according to TraX data from MarketAxess. The traded amount in Q1 2024 was the highest average daily trading volume in European government bonds since records began in 2014, with trading volume increasing 20.3% QoQ and 26.7% YoY. Outstanding amount of European ESG government bonds reached EUR 475.9 bn during 1Q24 with volumes driven by new green bonds issued by France (EUR 7 bn), Germany (EUR 6 bn), the UK (EUR 5.5 bn), and Italy (EUR 3.7 bn). The European Commission issued additionally EUR 5.8 bn in NGEU Green bonds. There was a net loss of 1 primary dealer in Europe (including the EU) from Q4 2023 to Q1 2024. There were 3 exits and 2 entries of banks to the European Primary Dealer system. Czechia, Greece, and Slovakia each had 1 primary dealer exit. Bulgaria and the UK each had 1 bank entering the local primary dealer system. During 1Q24 there was 1 credit rating upgrade in Portugal. According to the most recent data, Europe saw 1 credit rating downgrade in 2Q 2024 in France. This follows 3 upgrades and 1 downgrade in 4Q23. Roadmap to DLT Bond Issuance: AFME has published a report titled “Scaling Digital Bonds” which sets a roadmap to help Sovereign, Supranational and Agency (SSA) issuers gradually implement issuance of digital bonds with the use of Distributed Ledger Technology (DLT). Global issuance of DLT-based SSA bonds up to March 2024 (USD $980mn) already exceeded the total for the whole of 2023 by 204%. AFME’s roadmap is laid out in three phases: experimentation, scaling, and maturity. A summary of the roadmap is in this quarterly data report. AFME’s DLT roadmap report is available here.

The report presents the latest data on prudential capital, leverage, and liquidity ratios for European GSIBs, and illustrates the performance of debt and contingent convertible (CoCo) securities issued by European banks. Among the main findings of this report: The end-point CET1 ratio of European GSIBs increased to 14.2% in Q1 2024 from 14.1% in Q4 2023: The increase was primarily driven by strong organic capital generation partially offset by distributions to shareholders. Higher RWAs also contributed negatively to the variation. TLAC capital covered 31.8% of RWAs and 9.6% of the exposure measure in Q1 2024, marginally below 32.1% and 9.7% in the previous quarter. 2 out of the 29 monitored European countries increased their national countercyclical buffers in Q1 2024, while 6 countries will see further increases during the second quarter of the year. AT1 bond issuance recovery slows down: Following the March 2023 AT1 market turbulence episode, issuance started to recover in June 2023 and gradually increased during the rest of 2023. However, AT1 instruments only raised €4.6bn in proceeds in Q1 2024, marking a decrease of 51% YoY and 28% QoQ. This amount falls below pre-March 2023 issuance. AT1 risk premia returned to pre-turbulence levels. As of April 2024, the AT1 risk premium stands at 372bps, 24bps below the minimum levels observed in February 2023. GFMA responds to the GSIB revised assessment framework consultation on “window dressing” by the BCBS: In March 2024, the BCBS issued a consultation document proposing to modify the reporting instructions of stock variables used in the calculation of GSIB indicators. Under the proposed standards, stock variables will be reported at the average of values over the year rather than at end-of-year values. In its consultation response, AFME via GFMA questions that the evidence brought forward by the BCBS is not robust enough to justify a change in reporting requirements. If a change is to occur, a more suitable approach would be adopting a quarterly reporting framework to limit the burden placed on banks and ensure data accuracy. GFMA’s consultation is available here.

AFME is pleased to circulate its Q1 2024 Securitisation Data Report. Main findings: In Q1 2024, EUR 60.7 bn of securitised product was issued in Europe, an increase of 43.8% from Q4 2023 and an increase of 69.2% from Q1 2023. Of the EUR 60.7 bn issued, EUR 33.3 bn was placed, representing 54.9% of the total, compared to 67.3% of issuance in Q4 2023 and 55.4% of issuance in Q1 2023. Outstanding volumes (including CLOs) increased to EUR 1162.4 bn at the end of Q1 2024, a decrease of 1.5% QoQ and an increase of 2.4% YoY. Credit Quality:In Europe, upgrades comprised 87% of total rating actions by the main CRAs during Q1 2024, down from 90% of total rating actions during Q4 2023. STS issuance: In Q1 2024, EUR 14.4 bn of securitised product was notified as STS to ESMA and the FCA, representing 23.7% of the total issued volume in Q1 2024 (EUR 60.7 bn). Out of the EUR 14.4 bn in STS issuance, EUR 11.7 bn was placed, representing 35.1% of total placed issuance in Q1 2024 (EUR 33.3 bn).

The Report contains European leveraged finance market trends for Q1 2024. In particular, it includes issuance, valuations, and credit performance figures for the European high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €128bn in proceeds in Q1 2024, a 115% increase compared to €59.4bn issued in Q1 2023. The increase is attributable to a rise in both high yield issuance and leveraged loan origination. High yield bond issuance accumulated €40.4bn in proceeds during Q1 2024, an increase of 206% YoY and 157% QoQ. High yield bond proceeds were primarily used to repay or refinance debt (€29.9bn or 54.4% of the total), followed by general corporate purposes (€14.8bn or 36.6% of the total). The financial, customer discretionary, and communications sectors accounted for 62.1% of the issued amount. Leveraged loans generated €87.7bn in proceeds during Q1 2024, up from €46.1bn during the same period last year (+90%) and €54.1bn in the past quarter (+62%). The healthcare, professional services, and insurance sectors led origination, representing 37% of the quarter’s proceeds. Institutional spreads (3-month rolling average) gradually tightened over the quarter while remaining consistently above pro-rata spreads and ending the quarter at 408bps. Pro-rata spreads shortly rose to align with institutional spreads in February 2024, but dropped to 290bps by the end of the quarter. Credit Quality: S&P reported the trailing 12-month speculative-grade bond default rate at 4.11% in March 2024, an increase from 3.47% in December 2023. Moody’s reported the speculative-grade bond default rate at 3.60% in March 2024, relatively unchanged from the 3.54% recorded in December 2023 but up from the 2.59% of March 2023. 11 bond defaults were reported by Moody's and Standard and Poor's during the last quarter of the year. Fitch reported a trailing 12-month European leveraged loan default rate of 3.8% in March 2024, down from 4.39% in December 2023. According to Reorg, 100% of the European leveraged loan deals examined in the first quarter of 2024 were covenant-lite.