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SocGen: UK Bond Sales Muted Next Year as Banks Start Lending

Wednesday, 17 Nov 2010 08:27 AM

The company bond market will remain muted in Europe next year as borrowers return to banks as sources of funding, according to credit strategists at Societe Generale SA.

Bond sales from non-financial issuers will increase by 17.6 percent from this year to 120 billion euros ($162 billion), as redemptions rise 27.8 percent to 138 billion euros, strategists led by Suki Mann in London wrote in a note to investors.

Banks curbed lending after writing down or losing more than $1.3 trillion dollars since the start of the credit crisis in 2007, according to data compiled by Bloomberg. After record bond sales in 2009, companies are increasingly turning to bank loans as “pricing is collapsing,” the strategists said.

“The great structural change for the European credit markets has proved to be a false dawn,” according to the SocGen report. “The banks are back.”

The extra yield investors demand to hold corporate debt rather than government bonds is expected to fall by as much as 40 basis points next year, SocGen said. Spreads rose 3 basis points from the start of the year to 168, according to Bank of America Merrill Lynch index data. They dropped 258 basis points during the same period a year earlier.

“Margins have fallen by 50 percent in nine months, but are still a factor of two higher than they were pre-crisis,” the strategists wrote.

--Editors: Michael Shanahan, Paul Armstrong

To contact the reporter on this story: Ben Martin in London at bmartin38@bloomberg.net.

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net

© Copyright 2017 Bloomberg News. All rights reserved.

 
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The company bond market will remain muted in Europe next year as borrowers return to banks as sources of funding, according to credit strategists at Societe Generale SA.Bond sales from non-financial issuers will increase by 17.6 percent from this year to 120 billion euros...
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2010-27-17
Wednesday, 17 Nov 2010 08:27 AM
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