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In the first half of 2023, the SSD market presented 69 transactions worth a total of EUR 13.7 billion Despite a slight slowdown compared to the previous year, the market remains robust. ESG structures remain present in the second quarter, although slightly less so compared to the first three months of the year. The majority of issuers (83%) come from Germany. Investors prefer stable industries and growth markets with terms of 3 to 7 years.
At the end of the second quarter, the interest rate set by the ECB for the main refinancing operation rose to 4.0%. This is the highest key interest rate since the start of the financial crisis in 2008, and all interest rate hikes have been taken since July 2022 due to persistently high inflation in the Eurozone. At least one further interest rate hike is expected in the second half of the year. The interest rate curve remains inverted and flat, with rates of 3.65% for 3 years, 3.32% for 5 years, 3.18% for 7 years, 3.10% for 10 years and 2.92% for 20 years (as of MidSwaps: 05.07.2023).
The spreads of cash bonds compared to iTraxx provide information about the strong fluctuations during the crisis. Cash bond spreads stabilized in the first half of the year and volatility fell into perspective year on year. For example, the 5-year investment grade iTraxx at the end of the 2nd quarter of 2023 was significantly below the previous year's level of around 120 basis points.
Issuers must continue to get used to higher risk premiums, which have little to do with previous years' levels. Market prices are affected by the economic downturn and the increased risk awareness of investors.
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