Eurozone’s Sovereign Bond Issuance Estimated at EUR1,120 Bln
UBS, a Swiss multinational investment bank said that most Eurozone sovereign financing agencies had now published their 2022 funding plans, estimated higher sovereign bond issuance for the year.
Factoring in the draft budgets and its economics team’s estimates, these funding outlooks and its subjective judgment, the bank projected 2022 European Government Bond (EGB) gross bond supply at about 1,121 billion euros.
This was around 50 billion euros lower than the bank’s preliminary estimate and 66 billion euros lower than the gross issuance in 2021. Factoring in redemptions, net EGB issuance was projected at 400 billion euros, roughly 128 billion euros lower than in 2021.
Despite this reduction in supply, EGB gross issuance in 2022 would remain about 30% higher than the five-year average prior to the pandemic while net supply would still be around 60% higher, calculated UBS.
The European Central Bank (ECB) Governing Council confirmed the end of the Pandemic Emergency Purchase Programme (PEPP) in March followed by the recalibration of the Asset Purchase Programme (APP).
Overall ECB quantitative easing (QE) purchases were expected to total approximately 480 billion euros this year — a significant decline compared with the over 1 trillion euros in purchases in 2020 and 2021, wrote the bank in a note to clients.
Adjusting for ECB purchases of sovereign bonds, net supply this year was projected at about +112 billion euros compared with -203 billion euros in 2021, pointed out the bank.
This represented the largest year on year increase in QE-adjusted net supply since asset purchases began in 2015.
Italy (305 billion euros) and France (290 billion euros) were projected to have the highest gross supply followed by Germany (222 billion euros) and Spain (130 billion), added UBS.
However, the projected net issuance in France (141 billion euros) was significantly higher (and almost twice) that of Italy (77 billion euros) and Spain (67 billion euros).
Adjusting for QE purchases, France followed by Spain and Italy were expected to see the highest QE-adjusted net supply while Germany, Ireland, the Netherlands and Finland were likely to witness negative net issuance, according to the bank. #Eurozone’s Sovereign Bond Issuance Estimated at EUR1,120 Bln
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