European sovereign bond market faces big test in 2010
If things go according to plan 2010 will be a record year for issuance of government debt in Europe in 2010.
Barclays Capital forecasts €971 billion of gross new issuance, or €438 billion of net new issuance, a 20% increase on 2009. Between them, Greece, Portugal and Spain’s planned issuance should make up 17% of the total amount.
That’s likely to be quite manageable for the bigger borrowers such as Germany and France, says Allegra Berman, global head of SSAs at UBS. "I think they’ll have a good year, for them access won’t be a problem."
Although the southern European issuers might be less than a fifth of total projected supply, their ability to access the capital markets and the clearing price they pay holds the key to sentiment for the rest of the sovereign market. Under new leadership, the Greek debt management’s next visit to the bond market will determine funding levels for other southern European sovereign borrowers.
"It will be one of the great deals to prove what the bond markets can do in the face of all this, and I’m convinced there will be a clearing price," says Christopher Marks, head of EMEA debt capital markets at BNP Paribas. "Because of the level of the volatility, no one’s really sure where Greece’s levels are going to settle over the next six months or so.