Global corporate credit issuance in February declined driven by slack in Europe but was held together by strength in the U.S. With the start of systemic worries in the Euro zone as a result of Cyprus’ banking crisis, it could be a soft batch for European issuance this Spring which would hurt the biggest corporate underwriters in bonds including JP Morgan (JPM), Citigroup (C), and Bank of America (BAC).
Global corporate credit (bonds issued by global corporations) declined sharply in February as the amount of new bonds issued by European companies came down month-to-month with some of this slack being picked up by U.S. corporate issuance. Total global credit issued totaled $270.9 billion on 1,382 issues in February, a slack in activity from the $435 billion on 1,835 new issues from January. The main reason for the global decline was the much smaller contribution from Europe which declined over 50% month-to-month versus U.S. issuance which came down just over 30% from January into February.
European corporations issued just over $101 billion in total bonds in February, a 57% decline from the $241 billion that was underwritten from the area in January. While January is generally a seasonally strong month signifying the beginning of the year with new corporate budgets set, February of 2013 was unusually slow for corporate credit activity. The month of February was the 5th lowest on record in our report of the past 26 months in Europe, a situation that could worsen as the Cyprus banking situation starts to unfold in March. U.S. corporations were also less active in the second month of 2013 issuing 34% less in paper at $115 billion on 492 issues. January’s total for U.S. paper tallied $177 billion on 572 bond tranches.
If the Cyprus banking crisis, which looks to bail out the Mediterranean country with commercial bank deposits, is actually enacted, it may create an environment where European corporate credit is harder to issue. The leading underwriters which help facilitate this underwriting which would be impacted include JP Morgan (JPM), Citigroup (C), and Bank of America (BAC). For a full table of all leading credit underwriters, please see our most recent research (see our research on bond underwriting).
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