By Yoruk Bahceli

(Reuters) – Companies raced last month to the bond market, unaffected by the Ukraine conflict as they attempted to secure relatively low borrowing. However, the march rush didn’t stop first quarter sales of the euro currency from plummeting to a 4-year low.

Global bond markets experienced extreme volatility during the January-March quarter. This was due to hawkish turn from the U.S. Federal Reserve Bank and European Central Bank as well as Russia’s February 23 invasion of Ukraine. This, combined with lower funding requirements, caused bond issuance to drop across all categories of debt, Refinitiv data showing that it was the slowest quarter in three year.

According to Refinitiv, 93.6 billion euros was raised by investment-grade firms in the euro zone, which saw debt markets freeze longer after the invasion. This is the lowest quarter since 2018.

With 43.5 Billion euros in raised funds, March proved to be the busiest months since September 2020.

U.S. markets saw their highest monthly volumes since the Pandemic Liquidity Crunch of early 2020. In March, they had $130.6 Billion in sales. The first quarter sales were down to their lowest level in three years.

For a related graphic on U.S. corporate debt sales, click https://tmsnrt.rs/3tXm7wa

Helene Jolly (head of EMEA’s corporate investment-grade corporate syndicate) stated that “none of the syndicates had expected it to turn out quite as well.” Deutsche Bank (DE) Citing volatility and some bond outflows as well inflationary pressures.

Credit markets stabilised, and risk premia (the extra yield companies that pay on top to government bonds), have fallen below their levels prior to the invasion. This March’s issuance pick-up was due in part because of this.

Despite this, the cost of borrowing in the euro zone has tripled this year for investment-grade businesses, with BofA’s average yield at 1.50%.

Jolly explained that for issuers it is “that dynamic of saying yes (borrowing charges) are higher but historicalally it still looks great and anyone who’s come this year in terms what rates have done has seemed smart pretty much instantly.”

Some businesses have presented their plans for near-term financing, she said.

For a related graphic on Euro IG corporate debt sales, click https://tmsnrt.rs/3J0ll67

However, companies with subinvestment-grade credit ratings face a difficult backdrop. While the Euro area had virtually no “junk” debt sales, only $10.6 million was raised last month by U.S. junk name investors.

In both markets, Issuance fell 70% over the first-quarter 2021. This was the worst performance since 2016 (U.S.) and 2019 (Euro area).

Recent weeks saw a number of positive signs for Europe’s market, as companies that have split ratings (investment-grade or high yield) were able to issue bonds.

According to one manager, however, IGD Shopping Center Owner, the third company in this category, delayed a deal because it had received lower demand than it initially sought.

Daniel Rudnicki Schlumberger (NYSE :), EMEA head for leveraged finance at JPMorgan NYSE :, stated that client discussions have led him to believe the European high yield markets will restart around Easter.

“If market conditions aren’t improving, we’re going through a period where slow issuance will be seen that will make gradual progress.”

Rudnicki Schlumberger indicated that he anticipates the majority of the issuance coming from mergers & acquisitions financing. The rise in borrowing cost and heavy issuance during the pandemic make refinance deals less likely.