There is talk in the European primary bond market every year of a “summer break” — three to five weeks of little to no major currency benchmark issuance. Deal flow is typically expected to slow to a trickle after the Bastille Day holiday in France on July 14, marking the start of this unofficial hiatus.
There are benefits to this. This year in particular, more than $630bn-equivalent of SSA benchmarks in euros and dollars were priced during the first six months. “We all need a break,” exclaimed one market participant reflecting the views of a number of SSA issuers and bankers.
The pause allows all market participants to recharge, regroup, and restart at some point from mid to late August onward.
But there have been many years in recent history where there issuance has persisted into the summer. And in a year where uncertainty and volatility are key threats to funding programmes and where issuers have been rewarded for being nimble, there is every reason to think the market would be better off if it kept going.
Issuers may have front-loaded their funding into the first part of the year but not all are as ahead as they might like to be. A number of US-based supranationals would have just started their new fiscal year, for example, and the recent excitement around the French election meant weeks of missed opportunities.
Furthermore, the idea that bond markets have to stop because investors are all at the beach is outdated. If an upside of the pandemic was the discovery that capital markets folk could work from anywhere, a downside was, well, the discovery that capital markets folk could work from anywhere, including the beach.
That means that borrowers, particularly those with a diversified, global investor base, should not forget should make good use of the summer window.
After all, nobody wants to have to rely on October and November to be getting their last deals done. The US presidential election in November seems likely to be a source of wild volatility and instability. It will shorten the autumn issuance window.
Therefore, adding the summer session to the playbook will be the mark of the flexible issuer, especially given how much more crowded than usual the market is likely to be heading into September as issuers look to duck election worries.
Picking a quieter window will have its advantages too in allowing borrowers to ensure they catch the full attention of investors, rather than competing against a flow of competing issuance in a busier market.
UK rail passengers are urged to "see it, say it, sorted" when they discover something unusual on a train. SSA issuers this summer should get on board with a similar idea when it comes to an unusual chance to print: spot it, use it, sorted.