The KPMG Debt Market Snapshot Edition Q4 2022 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: Despite headwinds and volatility throughout 2022, economic activity has held up surprisingly well. Russia's invasion of Ukraine led to a surge in commodity prices and extreme volatility in energy markets, which have dominated European markets ever since. As inflation eats into consumer purchasing power, central banks are refocusing on price stability and aggressively raising interest rates. In 2022, we have seen the steepest interest rate hikes in four decades. The ECB further raised its rates in October and December, totalling rate increases to 250bps in recent months.
Given the uncertainty, headwinds and high volatility in European debt markets, 2022 was the most challenging year in the last decade. Total issuance fell to a degree usually associated with recessions. Even though, the impact of war in Ukraine and the deteriorating economic outlook affected borrowing appetite and M&A activity, debt markets remained open for business. Throughout 2022, borrowers continued to refinance or amend-to-extend their facilities early ahead of an expected price increase, often taking the opportunity to include sustainability into financings.
Partner, Deal Advisory
KPMG AG Wirtschaftsprüfungsgesellschaft
- The Schuldschein Loan market recorded its best fourth quarter ever and on a full-year basis, the segment reached a new all-time high of €33bn across 175 transactions. The less volatile environment for Schuldschein loans compared to the corporate bond market was one of the main reasons for the buoyant activity in the market.
- In 2022, volume in the Leveraged Loan market sank to a 10-year low and in the Sponsored Loan market the quarterly volume marked the lowest fourth quarter in over a decade. M&A financings declined as greater volatility and continued uncertainty dampened appetite for larger acquisitions and turned jumbo acquisition loans into a rarity.
- The High-Yield Bond market saw the lowest annual volume since the global financial crisis with financing costs at historic highs. As a result, the High Yield sphere seemed closed for most borrowers and liquidity was only available for high quality names.
- The Investment Grade Bond market showed a weak performance in 2022. After low issuance following the Russian invasion in Ukraine, issuance picked up in autumn. A main reason for this recovery was that the sharp rise in spreads that had dominated much of 2022 started to partially reverse in the final quarter of 2022.