Euro periphery high yield issuance hits $30 bln, same unlikely in 2015

The record corporate high-yield issuance of $30 bln in 2014 from Italy, Spain, Portugal, Greece and Ireland is unlikely to be repeated in 2015 as caution returns to debt capital markets, Moody’s Investors Service said in a report.

“With concerns about the creditworthiness of some of the euro area periphery sovereigns re-emerging, as highlighted by our recent decision to review Greece for downgrade, we believe new issuer volumes will be lower in 2015 than in the last year,” said Pieter Rommens, author of the report.

Moody’s expects that markets euro area periphery high-yield issuers will remain open in 2015 as search for yield and higher returns increases investors’ appetite for risk, as recently highlighted by the return of Wind and Telecom Italia to the debt capital markets. However, market access will remain more difficult for first-time issuers and smaller, less well-known names with weaker credit ratings.

For Greece in particular, unless markets regain confidence in its sovereign risk profile Moody’s does not expect an improvement in new issuer volumes from the country.

Moody’s expects that the start of the quantitative easing programme by the European Central Bank will continue to put pressure on yield across the Euro Area’s sovereign and corporate debt markets. This in turn will continue to attract investors looking to reduce exposure to emerging market risks, while trying to maintain some yield pick-up from the euro area periphery.