Corporate Bond Market Hits a Snag – or Just a Pit Stop?

Considering the record results of the first quarter, one might get the impression that the April issuance balance is somewhat disappointing. Indeed, there were fewer issuances last month (only 2 compared to 6 completed in March). However, among them is a rare gem—Marvipol’s issuance “broke the bank” and closed as the largest public issuance in history.

Investor appetite remains unsatisfied, and both April issuances ended with reductions. In April, the developer White Stone Development conducted a “small” issuance of PLN 21.5 million. It attracted 473 investors, necessitating a reduction of over 40% in subscriptions. The second issuance of the month—and simultaneously the largest public issuance in the history of the Polish bond market—was closed by Marvipol Development. The developer, also active in the warehouse sector, conducted an issuance of PLN 150 million. Despite its size, the issuance involved over 1,000 investors and required a nearly 6% reduction.

Source: Michael / Ström Dom Maklerski, own elaboration.

In the first quarter of this year, there were about 5-6 issuances per month, totaling between PLN 165 million and PLN 360 million. In contrast, April saw only two public corporate bond issuances amounting to “just” PLN 171.5 million. Additionally, Echo Investment’s issuance for PLN 60 million began last month and closed in May. In this case as well, there was a reduction of over 50% due to investor demand exceeding PLN 123 million, despite the issuer lowering the margin from 4.00% in previous issuances to 3.80% over WIBOR.

Not So Bad April

In terms of issuance volume, April was the second weakest month of the year, right after March, when 6 issuances were conducted, but their total value did not exceed PLN 165 million. However, in terms of investor demand, April performed the worst. We must remember, though, that we are comparing this month with a record-breaking quarter, so it is no surprise that it may appear somewhat “pale” in comparison.

A different perspective is provided by looking at the entire year and comparing it with the previous year. In the first four months of 2024, issuers conducted issuances totaling PLN 932 million with investor demand exceeding PLN 2 billion. By comparison, throughout the entire year of 2023, issuers conducted issuances totaling PLN 1.35 billion with demand just under PLN 2 billion. Thus, the value of investor subscriptions this year has already surpassed the total demand of last year. The value of issuances conducted last year met the “minimum” at 69%.

Funds and Forecasts for May

For corporate bond funds, both net inflows and their return rates for April were the lowest this year. Investors contributed PLN 227 million to these funds, compared to approximately PLN 700 million in other months of the year. The average return rate for April was only 0.20%. As a result, corporate bond fund assets at the end of April amounted to PLN 13.531 billion, after an increase of PLN 255 million in April (+1.90% m/m).

Even in what is theoretically the worst month of this year, we saw substantial investor demand, along with the largest public issuance in history conducted by Marvipol Development. The Echo Investment issuance completed in May also shows that market sentiment remains positive. After an incredibly intense first quarter of this year, we are experiencing a slight slowdown. However, it seems that the value of all public issuances from last year will be surpassed in the second quarter of this year.

Author: Szymon Gil, Securities Broker, Certified International Investment Analyst (CIIA), Michael / Ström Dom Maklerski