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Debt Watch Europe Q2 2022 Review

Corporate Debt Activity

Q2 2022 closed with 243 corporate debt deals, €138bn of investment grade issuance and €13bn of high yield issuance.

Corporate debt activity by quarter

Corporate debt activity by quarter

*The Q1 2022 market data in this publication is sourced from Dealogic as at 4 July 2022. Accordingly there may be differences to Q1 2022 data presented in Q1 2022 Debt Watch as the data was run as at 4 April 2022.

The second quarter of 2022 saw European corporate bond markets heavily impacted by economic uncertainty due to the war in Ukraine and tightening monetary policy. Overall in the European corporate bond markets activity levels dropped significantly in Q2 2022 in comparison to Q1 2022. There were 243 deals and c.€151bn raised in Q2 2022; lower than Q1 2022 in terms of number of deals raised during the quarter (301 deals by comparison), and in comparison to the c.€221bn corporate debt raised in Q1 2022. It was also significantly lower than the 396 deals and c.€247bn raised in Q2 2021.

After rebounding in Q1 2022 investment grade activity declined in Q2 2022 with c.€138bn raised and 208 deals, compared to c.€197bn raised and 255 deals in Q1 2022. Investor appetite for high yield bonds continued to dwindle, with the likelihood of further interest rate rises. In Q2 2022 there were 35 deals and c.€13bn raised in comparison to 46 deals and c.€24bn raised in Q1 2022.

After a record quarter in Q1 2022 for corporate bonds raised with a green/ESG element of c.€50bn, Q2 2022 saw a decline to c.€45bn, however the number of deals with a green/ESG element in Q2 2022 of 81 was consistent with Q1 2022 which had 80 deals. The c.€45bn of corporate bonds with a green/ESG element in Q2 2022 was in line with the c.€45bn raised in Q2 2021, however the number of deals in Q2 2021 was higher at 99. In May 2022 Dutch based utilities company TenneT issued the largest ever corporate green bond, a four tranche bond raising c.€3.85bn.

Increased cost of financing

The average yield-to-maturity at issuance rose for all investment grade and high yield rated bonds in Q2 2022 compared to Q1 2022 by more than 1%. The increased cost of raising capital had been expected and issuers have had to pay a premium to raise corporate debt in a rising interest rate environment and due to uncertainty in the market caused by the war in Ukraine. Notably the average yield-to-maturity for AA rated bonds nearly doubled from 1.46% in Q1 2022 to 2.90% in Q2 2022.

As investors' concern about riskier assets and their risk of default increases, the average yield-to-maturity at issuance for BB rated bonds has increased from 3.4% in Q1 2022 to 5.28% in Q2 2022 and from 5.9% in Q1 2022 to 8.6% in Q2 2022 for B rated bonds. The supply in the high yield bond market continued to decline in Q2 2022 reflected by another increase in the delta of issuance yield between BB and B rated from an average of 2.5% in Q1 2022 to 3.3% in Q2 2022.

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Sarah Hitchen

Sarah Hitchen

UK Capital Markets Leader, PwC United Kingdom

Tel: +44 (0)7734 958782

James Millar

James Millar

Director, PwC United Kingdom

Tel: +44 (0)7725 706184

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