Corporate Bond Market Thrives in October: Record Demand and Robust Issuances

October turned out to be one of the most successful months of this year in the corporate bond market. With three issues totalling PLN 195 million, investors made subscriptions amounting to almost PLN 676 million.

Hence, October has become the third-best month of this year in terms of funds raised by companies (after PLN 360 million in February and PLN 235 million in January), and the second-best in terms of the size of subscriptions made by investors (PLN 912 million in February and PLN 664 million in January).

Source: Michael / Ström Dom Maklerski, Own Analysis

In this ‘top-tier’ month, 3929 investors took part in the public issuance of corporate bonds with an average level of reduction of over 60 percent. Two out of three issuers are debt collectors – KRUK, a regular participant who presented a new prospect, and BEST, which is also listed on the stock exchange. Given the structure of the bond market, a developer couldn’t be absent among the issuers – this time it was a commercial one, Olivia Fin. Each of these three emissions attracted over PLN 100 million of demand from investors. KRUK broke the bank, collecting the most subscriptions in the history of public issuance of corporate bonds – 434 million.

No Signs of Investors Winter Hibernation

In November, we have already three more public issues: PragmaGo’s completed emission of 5 million euros (with 30% reduction), Cavatina Holding’s issue of PLN 25 million with the option to increase it to PLN 50 million running until November 1st, and a ‘do-over’ emission from KRUK amounting to PLN 100 million, which can be increased to 125 million. Given the huge demand, this should not come as a surprise and KRUK itself decided to extend the lifetime of bonds by one year compared to the October issuance.

October in Funds

On the side of the corporate bond funds market – in October, “only” 285 million PLN flowed into them. Hence, it was the third worst month of this year in terms of inflows to this asset group (since the beginning of the year, inflows amounted to over PLN 4 billion). The average rate of return for the last month was 0.20 percent, with the annual average at 8.70 percent. The positive rate of return and net inflow resulted in an increase in the assets of corporate bond funds by 2.40 percent to the level of PLN 14.3 billion.

The end of the year looks promising. We are already past three relatively large issues. November will see a continuation of significant supply from issuers and investors, who’ve grown accustomed to such trend this year, will probably once again show a distinctly unsaturated demand for bonds.

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