After reaching record levels of total outstanding volume and new issues in 2021, the Nordic corporate bond market (NO, SE, FI and DK ISINs) experienced a 56% decline in new issue volume and an 8% decline in outstanding volume by the end of 2022.
Despite a challenging financial environment, first time default rates declined through the year and the Nordic High Yield (HY) index came out with a positive return of 1%. Green bonds continue to show strong growth and are becoming a material part of the Nordic corporate bond market.
Norway and Sweden continue to be the key countries of the Nordic corporate bond market for local ISINs, representing 51% and 39% of the total outstanding volume.
Cato Holmsen, Group CEO of Nordic Trustee and Global Head of Ocorian Capital Markets said: “2022 has been quite a challenging year for the Nordic bond market. War in Ukraine, a European wide energy crisis, rapidly rising inflation and interest rates globally have put stress on the capital markets and world economies.”
Major decline in new issues of corporate bonds
After a 68% increase in new issue volumes during 2021, last year delivered significant lower new issue volumes across all regions. Total Nordic corporate new issue volumes decreased by 56% in 2022, ending the year at EUR 19bn. This is the lowest level we have seen since 2016.
New issue spreads have increased significantly through 2022 following the rapidly rising inflation and interest rates. The corporate IG segment has seen a much higher relative spread increase than the HY segment.
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Despite a more challenging financial environment, first-time default rates in the Nordic corporate HY market have been decreasing through 2022. For the total market, the first-time default rate was 2.5% of total outstanding volume in Q1 and 0.7% in Q4.
Volatile pricing in Nordic high yield market
The pricing of Nordic HY bonds has been very volatile through 2022, but the Nordic HY index closed 2022 with a positive overall return of 1%. Real Estate is the only sector with negative returns in 2022 at -6.1%, while O&G had the strongest sector return at 13.5%.
“2021 was a record new issuance year in the Nordic bond market, but in 2022 this momentum has been replaced by increased uncertainty,” Holmsen said. “At year end, total outstanding volume was EUR 116bn, a decline of 8% compared to 2021. Still, the Nordic corporate bond market has proven to be a robust source of capital with low and declining default rates through 2022.”
