The bond market stabilized in the third quarter of 2023 in a market environment that remained difficult (including maturities, spreads). However, the requirements for issuers remain demanding in terms of sector and credit rating. Here are the highlights:
Market volume and emissions:
Market volume: By the end of the third quarter, the total volume was EUR 16.9 billion, which is around 25% below the previous year's level. This marks a significant decline compared to the previous year.
New issues: With 19 new issues and currently 10 issues in parallel marketing (as of 05.10.2023), there is ongoing activity in the market, although the share of foreign issuers has fallen significantly compared to the previous year.
Terms: The focus remains on 3 to 5-year terms, while longer terms of over 7 years are significantly underweighted.
Sustainability component: Around a third of all transactions include a sustainability component, whether ESG or KPI-linked or marked as “green.” This reflects the increased interest in sustainable financing.
Interest rate landscape and spread development:
Key interest rate hikes: On 14.09.2023, there was an interest rate increase of 0.25% to 4.50%, while the deposit rate is currently 4.00%. This increase continues the trend of tighter monetary policy.
Yield curve: The yield curve remains mostly inverted, particularly with shorter and longer maturities, which is indicative of current economic conditions.
Yield premiums and spreads: Yield premiums remain stable and are heavily dependent on credit quality, sector and transaction volume. Longer terms require higher spread charges.
Expectations: The forecasts show a continuing higher level of spreads, as a result of reduced investor demand at the end of the year and increased refinancing costs.
Outlook for monetary policy decisions:
On 26.10.2023, the ECB decided to take an interest break for the first time since July 2022.
The upcoming ECB monetary policy meeting with interest rate decision will follow on 14.12.2023
Due to the flattening inflation rates, no further interest rate hike is currently expected. Economists expect a slight fall in key interest rates in the second half of 2024.
Like all of 2023, the third quarter has shown that the Schuldschein loanmarket remains robust despite some challenges, with continued focus on adapting to changing economic conditions and the needs of issuers and investors. The emphasis on sustainable financing and responding to interest rate changes will continue to be important aspects for players in the Schuldschein loan market in the 4th quarter of and in 2024.
We are always happy to provide you with individual advice on structuring Schuldschein loans, in particular in view of the above mentioned market changes. Feel free to take advantage of the opportunity at any time in a video conference or a personal exchange to present our range of services and to use an indicative offer.
The bond market stabilized in the third quarter of 2023 in a market environment that remained difficult (including maturities, spreads). However, the requirements for issuers remain demanding in terms of sector and credit rating. Here are the highlights:
