December is a period when investors have often reached capacity on their credit lines and do not wish to jeopardise their performance for the year — or at least, that is the conventional thinking at this time of year.
But recent primary market activity suggests otherwise.
Take the senior preferred bonds issued by Commerzbank and Achmea Bank this week: order books finished at more than five and seven times subscribed, respectively.
Rather than slacking off, investors — awash with cash from relentless inflows into credit all year — have been keen to channel money into well rated, senior new bond issues.
For issuers, a credible assumption is that by January the buy-side will have even more fresh money to put to work thanks to plenty of redemption flows. But that tactic might not work for every borrower.
Investors are worried about added complications in the new year: Donald Trump is set to assume office on the January 20, threatening inflationary policies that could hurt Europe's economic chances.
Then there are the political and economic riddles in France and Germany to solve, and their effects on the swap spreads.
Those spreads have narrowed sharply over the past quarter and many expect them to remain in a holding pattern, or even tighten further. And senior spreads are far more sensitive to swap spread dynamics that some other parts of the credit stack.
All of that may well make issuers more reticent than usual to buy in the primary market in January.
Seeing trouble ahead, issuers eyeing the senior bank bond market would do well to come now in December, rather than risk being just another name in the January deluge, and at a time when volatility could really flare up.