Euro bank debt issues drying up

EUROPEAN bank debt markets are drying up, according to data compiled for City A.M., in a development that is exacerbating funding concerns and could see the European Central Bank (ECB) re-enter the market for bank bonds.

Data supplied by Dealogic shows that the value of bonds issued by European banks has dropped off dramatically so far this quarter. While they sold €285.3bn (£248bn) in the first quarter and €168.3bn in the second, lenders have so far sold just €64.5bn this quarter, which ends in one week.

The vast majority of that issuance has been in covered bonds, which are considered safer by investors but require banks to tie up a pool of assets in order to generate interest on the bonds. Last week, the region’s lenders sold just €2bn in non-covered bonds.

The scarcity of buyers for bank paper has seen European leaders signal they could step into the breach. ECB board member Lorenzo Bini Smaghi said with regard to banks: “For liquidity, we are there… we are ready to do what is needed.”