The year ahead will offer more of the same for the European debt capital markets, according to SGCIB, with fundamentals remaining strong for credit.
The French investment bank predicts that spreads will continue to tighten in 2005, with credit spreads influenced by flat M&A activity and uninspiring capital expenditure and dividend growth. Margins in the loan market will remain aggressive as corporates thrive on strong bank competition. What does this mean for corporates?
"Given this ongoing environment, investors are expected to continue the hunt for yield," says the bank. "For instance, activity at the long end of the curve is expected to be high in the early part of 2005 as is that of the high yield market. We are also likely to witness further maturity extension from subordinated financials and in covered bond markets."
Supply levels for corporate bonds and loans in the coming year are expected to remain consistent with 2004 levels, with covered bonds seeing a notable increase in activity.