KPMG Debt Market Snapshot - Issue Q4 2023

The KPMG Debt Market Snapshot Edition Q4 2023 is here. With the aim of keeping you up to date on the latest developments and trends in Europe's financing markets, our Debt Advisory experts use current market data to discuss prominent market drivers and provide first-hand insights from daily practice. Read more in our most recent edition.

Overview: in 2023, the world faced a multitude of challenges, including bank collapses, an energy crisis, supply chain issues, inflation and rising interest rates. Moreover, in early Q4 geopolitical risks once again took center stage, with a newly intensified conflict in the Middle East and the ongoing war in Ukraine, as well as tensions between the US and China.

These challenges have negatively impacted the European economy and debt markets. In 2023, recessionary sentiment and geopolitical tensions continued to dampen borrower appetite and acquisition activity, and kept lenders cautious. As European debt markets witnessed the second consecutive year of depressed debt volumes and limited M&A opportunities, refinancings continued to dominate the markets. Despite a challenging year, bond market activity developed positively, and the bond, loan, and Schuldschein markets remained liquid throughout the year.

• The Schuldschein loan market saw a significant decrease in issuance volume YoY (~€6.0 billion across 32 transactions in Q4 2023). However, this decline follows a strong 2022 and is thus overall in line with Q4 volumes throughout previous years. The share of ESG issuances at 33% in Q4 2023 trails previous quarters.
• In the investment-grade bond market, stabilizing spreads continued to provide the necessary confidence for issuers to participate in Q4 2023. The improved conditions offered an appealing alternative to loan and SSD financings, which attracted borrowers from these respective markets.
• The high-yield bond market recorded an issuance volume of €7.0 billion in Q4 2023, marking an increase of ~46% YoY after a very weak 2022. However, total issuance volume in 2023 was €43.0 billion, well below pre-pandemic levels. The current interest plateau in conjunction with lower volatilities can be seen as a driver for demand.