$1trillion of euro zone bonds to snap up in 2013

January 3, 2013

Investors keen to wade deeper into the euro zone’s quieter waters  will have 765 billion euros,  or just over $1  trillion, worth of fresh government bonds offered to them this year, nearly 8 percent less than in 2012,  Deutsche Bank writes in a report.

With the debt crisis quieting down, euro zone assets are among the top 2013 picks for many leading investors, with the likes of Societe Generale and AXA Investment Managers advising to head for the periphery with Spanish and Italian sovereign debt.

Deutsche Bank writes in its Eurozone 2013 supply outlook report, based on the bloc’s ten biggest bond issuers:

Gross issuance of EUR 765bn would be a decline of ~EUR 65bn compared to 2012 despite the fact that the IMF expects Ireland and Portuguese to issue around EUR 10bn more in 2013 compared to 2012.

Compared to 2012, we expect bond issuance to be much lower in Italy (due to lower redemptions) and marginally lower in Spain (offset by increase in bill issuance)

 

Debt-choked Italy has nevertheless the top spot for gross bond issuance this year with 187 billion euros, with Germany (183 billion) and France (169 billion, excluding buybacks) in the second and third spots, and Spain far behind in fourh position at 90.4 billion euros. Net sovereign bond issuance would total 177 billion euros while there would be just under 9 billion euros of net bill issuance in the euro zone this year.

For fans of Spanish debt, Deutsche Bank writes:

Based on the redemption profile we would expect a new 5Y and a new 10Y benchmark to be launched. If longdated yields were to decline Spain could also issue a new long-dated benchmark as it does not have any bonds with maturity greater than 2037 outstanding.

In 2013, Spain’s domestic bond redemptions are in January, April, July and October. In comparison, in 2012, Spain did not have any redemption in January. The start of 2013 is therefore likely to be tricky for Spain from a cashflow perspective and could hasten the request for the OMT.

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