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The KPMG Debt Market Snapshot Edition Q4 2021 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 release.

Overview: European debt markets were able to recover from the pandemic in 2021. Fuelled by fiscal stimuli, low interest rates and excess liquidity available, debt issuance clearly surpassed pre-pandemic levels in most market segments. However, risk factors, such as supply-chain shortages, higher production costs, surging inflation and the resurge of COVID-19 cases led to some uncertainty, especially during the final quarter of the year. An important lesson learned from the past 12 months relates to ESG considerations that have continued to be integral to all types of financing processes and strategies across all sectors.

With still high market liquidity available, low borrowing costs and the necessity to increasingly address sustainability-related issues, the overall dynamic for European debt financing remains favourable for the upcoming months.

Highlights from 2021:

  • Driven by high sponsor activity, a packed M&A pipeline as well as opportunistic financing, the leveraged and sponsored loan market recorded a volume not reached since 2007. 
  • Attractive financing conditions and large-scale M&A activity led to high-yield bonds shattering record volumes in 2021. With the ECB continuing its expansive monetary policy (at a reduced pace) and some potential mega deals ahead, the high-yield bond segment is likely to prosper in the upcoming months.
  • After a quiet first six months, the Schuldschein segment saw a remarkably high level of activity in the closing quarter of 2021. The SSD market recovered lost ground in the second half of the year as cyclical companies returned and debut issuers tapped the market. With ESG features already being included in around 30% of the issuances in 2021, sustainable SSD will likely gain a larger market share going forward.
  • Sustainable finance ultimately evolved from a niche product to the new normal. Fuelled by political decision-makers and enhanced social awareness, the sustainable finance volume increased by 85% year-over-year. With the EU Taxonomy coming into force from 2022 onwards, issuers and investors alike will continue to spur on this megatrend.