Companies still able to raise funds in an unstable European debt market are going for size, hoarding cash after a weekend of grim coronavirus news raised the prospect of a protracted fight against the pandemic.

Anheuser-Busch InBev NV, Thermo Fisher Scientific Inc. and Volkswagen AG are all offering multi-tranche euro-denominated bond deals on Monday, seizing a narrowing window of opportunity as risk gauges start flashing red again. It follows a blank session in Asia’s dollar bond market, where issuance has stalled for several weeks.

“As corporates should remain keen on retaining liquidity to weather the growing pain of lockdowns, we expect issuance windows to continue to attract issuers,” Commerzbank strategists said in a note to clients this morning.

Rebounding risk

Surging corporate credit risk in Europe and Asia has brought to an end a burst of optimism in markets that saw almost $200 billion of new debt sales in Europe and the U.S. last week, according to data compiled by Bloomberg. Spain and Italy recorded more than 3,000 deaths from the virus over the weekend, while the global death toll has surged beyond 34,000, according to Johns Hopkins data.

That’s prompted a risk-off start to the week, with the cost to insure euro-denominated corporate debt rising as much as 8.5 basis points in early trading, undoing almost half of last week’s tightening, according to Markit iTraxx Europe index data. In Asia, yield premiums on high-grade Asian dollar bonds and the cost to insure debt in the region both climbed on Monday, according to traders.

The six deals being marketed in Europe on Monday are all investment-grade rated, with the three non-financial borrowers all rated triple B or higher, data compiled by Bloomberg show. Even so, they’re having to pay a premium to get deals done. AB InBev is offering euro notes maturing in April 2032 at about 305 basis points above midswaps, nearly triple what it paid a year ago to sell debt due in March 2031.

European stocks have followed Asia lower, while oil plunged to a 17-year low as coronavirus lockdowns pounded the world’s largest economies. The top American infectious disease expert said deaths from the virus in the U.S. may reach 200,000. Global coronavirus cases climbed above 720,000, and President Donald Trump abandoned his ambition to return American life to normal by Easter.

While the turmoil has brought down prices of even the best quality debt securities to bargain levels historically, trading has remained sparse.

“It is imperative to retain a cautious stance towards the riskiest credits,” Goldman Sachs Group Inc. analyst Kenneth Ho wrote in a report dated March 28. “We believe it is too early to say that markets have decisively turned the corner.”

Europe

• Corporate credit risk is rising on Monday after improving through most of last week, when nearly 75 billion euros priced in the busiest week for sales since January
• The Markit iTraxx Europe index has opened more than 8 basis points higher this morning at about 102.8, according to CBBT prices, undoing nearly half the index’s tightening from last week
• Euro IG company bond spreads at 241 basis points have eased slightly after reaching the highest since 2012, according to a Bloomberg Barclays index; current levels are about 35bps too wide as the market is “not properly discounting” ECB corporate bond purchases, according to ABN Amro strategists
• Six borrowers are in the market on Monday, including AB InBev, CPPIB Capital and Hamburg; AB InBev is marketing three tranches of euro notes, including a 12-year handle at about 305 basis points above midswaps and nearly triple the 105 basis-point spread it paid a year ago to sell notes maturing in 2031
• Companies are also heading to the loan market to shore up financial buffers, with Airbus and Daimler potentially closing at least 25 billion euros ($28 billion) of combined new loans within weeks
• Airlines worldwide raised more than $17 billion in bank loans in March to shore up finances as the coronavirus grounds flights, with U.S. carriers like Delta Air Lines Inc. the most active

Asia

• The Markit iTraxx Asia ex-Japan index of credit-default swaps increased about 8 basis points to around 142, according to traders; the gauge tumbled 49 basis points last week, its steepest fall on a percentage basis since 2009, according to CMA data
• Spreads on Asia investment-grade dollar bonds were 5-10 basis points wider this morning, according to traders, putting them on track to widen for the first day in five; liquidity is very thin, according to one of the traders
• Global credit is a “buyers’ market right now” for investors holding cash, according to portfolio manager Raymond Lee at Kapstream Capital. “Even high-quality, high-rated investment-grade names are trading very wide based on historicals and look like good investments.”
• A global economic slowdown caused by virus containment steps “will trigger a default cycle in credit worldwide,” said Paul Lukaszewski, head of corporate debt for Asia and Australia at Aberdeen Standard Investments
  • “The question for investors to assess is how severe this cycle will be compared to what is priced in,” he said, adding that the wide credit spread levels last week had reached the peaks of all prior downturns this century with the exception of the global financial crisis
• Local currency markets in Asia have also been hit; the latest sign of that was in Korea, where yields have jumped:

U.S.

• After abating throughout most of last week, CDX showed rising credit risk Friday; that came on the heels of a new record outflow in investment-grade funds
• Six deals priced for a total of $10.95 billion Friday, piling even more supply onto last week’s record volume; weekly issuance exceeded $109 billion