The European Central Bank is bailing out the region's bond market and, in doing so, boosting beleaguered banks.
The ECB's announcement last week to increase corporate bond buying to 80 billion euros per month triggered a rush of companies stampeding to lenders and looking to finance deals. Anheuser-Busch InBev followed up on a $46 billion bond deal by issuing more than 13 billion euros of debt to European investors this week, a boost for banks in Europe that worked on the deal. Deutsche Telekom also priced a 4.5 billion-euro deal.
Getting a flood of corporate bond issuances to close out a first quarter when banks globally came under fire for the quality of their energy loans has the potential to reverse an ugly trend before earnings are reported.
"The banks are poised for some rebound," said Julien Jarmoszko, senior investment manager at S&P Global Market Intelligence. "The European banks are a lot stronger than they used to be."
Right now, the euro-denominated bond market is as frothy as it's ever been. More than $38 billion in investment-grade deals were done so far this week, according to Dealogic. With one day to go, the all-time high of $44 billion in issuances, from mid-2008, is well within striking distance (Dealogic's data tracks back to 1995). Further, jumbo transactions have fueled this rise in issuances. There have been only 25 euro-denominated bond issuances this week, compared to 72 deals in 2008 when the record was set.