Opportunities in the Corporate Bond market

13.10.2021

The corporate bond market has gained significant ground in the past few years. This is part of what Fossar Market’s Managing Director of Capital Markets, Steingrímur Finnsson, had to say about the outlook on the market in a recent interview with Markaðurinn, the business section of Icelandic newspaper Fréttablaðið. Steingrímur has no doubt the corporate bond market will be on a fast rise in the months ahead despite its lack of growth since the beginning of this year.

Steingrímur goes on to say that the market has evolved from its modest state in the past few years as the Icelandic capital market recovered from the financial crisis of 2008. Very few companies were listed on the market during this period and the fixed income market was more or less used solely by the Government along with a few municipalities. Considering the situation not too long ago, the market has undergone a great change, developing in line with expectations.

“For a long time, the market primarily consisted of relatively plain vanilla CPI-linked bonds which were mostly catered to institutional investors. But at this point it has numerous benchmarks aimed at different types of investors. Not to mention the big steps that have been taken in issuing of green and sustainable bonds which have been very well received in the market,” Steingrímur added.

He states that Iceland is trailing other countries when it comes to developing a corporate bond market but a change is underway. Particularly regarding the fact that Iceland is one of the most developed countries in the world with a relatively underdeveloped capital market. Globally, the shadow banking system and market based financing has become a dominant avenue for the transfer of capital in the economy in the past decade. Steingrímur believes the Icelandic market is trailing approx. 5-7 years behind this development and that it is clear that the bond market will be an increasingly attractive source of funding for businesses, municipalities and other issuers in the near term – and going forward the best possible option available to these parties.

The coverage in Markaðurinn can be found here in Icelandic: https://www.frettabladid.is/markadurinn/horfa-fram-a-voxt-i-utgafu-fyrirtaekjaskuldabrefa/