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Little relief in sight from the investment grade drought

Corporate issuance is down in Europe but supply is being bolstered by dollar issues from European corporates. So is this a good year for the debt markets? Bankers are not sure.


IT HAS BEEN a strange few months for primary debt issuance in Europe. Overall volumes are holding up so far this year, compared with the same period in 2003, but European corporate issuance is down by 40%. The situation is particularly dire for euro-denominated issues. According to data from Thomson Financial, euro corporate issuance in the first quarter of 2004 was down 75% on Q1 of 2003.

Thankfully, there have been some dollar issues from European corporates. "We may not have much new issuance in euros, but we've done quite a lot of yankee deals. For example, we did a $2.5 billion deal for GlaxoSmithKline at the end of March and a $950 million increase for Glencore as well as a $500 million 10-year issue for Statoil," says Eirik Winter, head of European corporate capital markets at Citigroup.

But the clutch of corporate benchmark deals that usually mark the first quarter of the year notably failed to materialize and by April investment-grade corporate issuance in euros had slowed to a trickle. "The problems started at the beginning of the year, when the Street was very long on paper.

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