(Bloomberg) – With market volatility unnerving investors, companies are now paying the biggest premiums to sell new bonds since the peak of the coronavirus pandemic two years ago.

Issuers such as Philips and TenneT Holding BV lured investors by paying a premium of more than 22 basis points on average to sell new euro bonds. That’s the highest in about two years, according to data compiled by Bloomberg that has been tracking fixed-rate transactions since the last week of April. The metric indicates the incremental yield of a new bond relative to the seller’s existing debt.

Companies are bearing the added cost of driving demand for their deals and ensuring they break through as the global economic outlook becomes increasingly uncertain. Euro-denominated high-quality borrowing costs are at their highest in nearly two years after April was rated the worst monthly performance for global corporate bonds since the pandemic first rocked markets. times in March 2020, according to a Bloomberg index.

“Issuer psychology has moved away from looking for price deals with a new negative issue premium, to just making deals, while avoiding execution risks,” said Marc Baigneres, head of Western Europe, Japan and Australia. finance at JPMorgan Chase & Co. “Patience became the key.”

The latest deal from Gucci owner Kering SA illustrates how market dynamics have changed. The French luxury fashion group ended the longest dry spell for euro non-financial bond sales since 2020 with a two-part deal on April 28 that included an eight-year note at a price of about 14 basis points above its existing bond curve. That’s a stark contrast to its last euro offering in 2020, when it issued two notes at spreads well within its existing curve, according to data from Bloomberg.

The biggest sweeteners of the year can be found in last week’s four-part green offer from Dutch power company TenneT. Buyers received concessions of more than 40 basis points on a 2029 tranche and 38 basis points on a 20-year note.

Spokespersons for Kering, Philips and TenneT did not respond to requests for comment on sales.

The current trade execution dynamics and oversubscription levels are “making some issuers rather nervous,” Rabobank’s debt capital markets team wrote in a May 4 note. the Windows.”

With market sentiment very tight, it is likely that borrowers choosing to access the European debt market will continue to pay for now.

“The volatility means we have to keep our cards much closer to our chest before we execute and be smarter about how and when we bring clients to market,” JPMorgan’s Baigneres added.

Elsewhere in the credit markets:

EMEA

A planned NextGenerationEU agreement with the European Union could give a boost to the European primary market, as risk gauge on the region’s safest companies exceeded 100 basis points for the first time in more than two years.

• A Nationwide Building Society covered bond deal is one of only two deals in the market on Monday, while this week’s investment-grade bond pipeline includes an expected 8-year Euro benchmark deal from Electrolux which could also intervene today
• The weekly issue exceeds 30 billion euros according to 19% of respondents in a Bloomberg News survey carried out on May 6

Asia

Credit markets experienced a weak session on Monday with a Hong Kong public holiday halting selling. Debt risk soared globally last week and Treasury yields jumped on inflation fears.

• Bond markets could be something of a bounce after racking up nine straight months of record losses, with April being the worst ever, fund managers are already signaling signs of a change in the outlook for inflation and economic growth

Americas

Higher-quality issuers could sell bonds at a faster pace this week after market volatility pushed many borrowers to the sidelines over the past month, with estimates of $25 billion to $40 billion.

• Most syndication desks predicted $125-150 billion in new debt in May and it’s likely that many will try to get back into the market in the next possible window.

–With the help of Priscila Azevedo Rocha.

© 2022 Bloomberg L.P.