The primary debt capital market contracted in January

In January, there was a contraction in the primary debt capital market. According to Cbonds, corporate borrowers placed bonds for a total amount of just over 118 billion rubles, which is almost half as much year-on-year. Against the background of low activity of companies in the real sector, the main participants in placements were non-credit financial organizations and issuers of high-yield bonds (HYB).

After a surge of activity in the domestic debt market in December 2023, large companies took a pause in bond placements in January. According to Cbonds, over the past month, corporate borrowers placed bonds for a total amount of just over 118 billion rubles. This is 12 times lower than the result of December 2023 and almost half as much year on year.

The actual result for January was even lower, as many technical placements took place last month. According to the estimates of the chief analyst of BC Region, Alexander Ermak, at the beginning of the year, placements of 35 issues were completed, which began in 2022-2023, in the amount of 31.7 billion rubles. As a result, during the month, 46 bond issues were placed on the primary market for a total of about 75.7 billion rubles.

January is traditionally not the best time for the debt market; a quarter of the month falls on official holidays and weekends. In addition, many large companies are rushing to issue placements in December. But still, several large issues took place: JSC Russian Railways (30 billion rubles), KamAZ (10 billion rubles) and Polyus (15 billion rubles).

Despite the passivity of companies in the real sector, activity in the debt market of financial institutions remained active in January. According to Alexander Ermak’s estimates, during the month 32 issues of structured bonds were placed with a total volume of 12.78 billion rubles, including 23 from credit institutions (for 5.8 billion rubles). Another about 6.7 billion rubles. banks attracted funds as part of placements of classical bonds.

Small non-credit financial organizations (leasing companies, IFCs and others), as well as issuers of VDOs, stand out against the general background. The former placed bonds worth 8 billion rubles during the reporting period.

As Dmitry Nikonov, head of the investment analysis department at Sovcombank, explains, small financial organizations “traditionally have a higher interest margin reserve than banks and large leasing companies, since they work with a riskier category of borrowers who are willing to borrow at higher rates.” Also, due to the initially high interest base (mFO loan rates are calculated in tens of percent per annum), it is easier for them than for banks to pass on the increase in the Central Bank rate to the consumer.

“We see interest in bond placements of companies not only of the first and second, but also of the third tier and representatives of the VDO sector,” notes Rustem Kafiatullin, director of the debt capital department of the Sinara investment bank. According to Alexander Ermak, in January, companies in the VDO sector completed placements of 11 issues for a total of 2.2 billion rubles. “For VDO, the only thing that is of great importance is the presence of demand from investors – individuals, and in January it is traditionally quite high,” notes Denis Leonov, head of the debt capital markets department of BCS CIB.

In the coming months, market participants expect a recovery in the activity of large issuers in the real sector. “First- and second-tier issuers are just completing and closing the previous financial year, are gradually entering the new year 2024, we predict a gradual increase in activity in February-March, and since no one expects any negative decisions for the market at the Central Bank meeting scheduled for February 16 , then it is possible that the fact of the meeting will not affect the activity of issuers,” believes Mr. Leonov.

The recovery of companies’ activity will be facilitated by increased investor interest in the debt market. The rates are quite high, notes Maxim Chernega, head of the DCM department of corporate finance at Digital Broker, and “investors are ready to give companies money at these rates in order to secure high returns now.”

Vitaly Gaidaev