As issuance across the rest of Europe slows or dips, non-financial and real-estate firms in the Nordic region are barreling ahead, with an increasingly leveraged property market and a rash of deals driving the trend.
"It seems that we are on track for a new record supply from the Nordics," said Antti Saha, head of debt capital markets at Nordea Markets in Helsinki.
Saha, who estimates Nordic companies will sell as much as EUR 40bn of bonds this year, says a "key driver" is real-estate debt. Issuers that are far from household names outside Scandinavia, like Fastighets Balder and Samhallsbyggnadsbolaget i Norden, have been among the sector's most active borrowers this year.
But it's not just the region's hot property market that's feeding issuance.
According to Martin Edemalm, a portfolio manager at SEB Investment Management, there's also "high M&A activity", much of which has been debt financed.
And he points to tougher bank capital requirements as a trend that's pushed more borrowers to capital markets.
Deals like Danfoss, which last month issued EUR 1.9bn worth of bonds to finance a takeover of Eaton Corp.'s hydraulics unit, mean Nordic corporates have now raised more debt in euros in the first five months of the year than ever before, over a similar period.
Corporate borrowers in the region have sold about EUR 19bn euros of debt, a 33 percent jump on the same period last year, according to data compiled by Bloomberg.
Much of the debt being sold carries some form of environmental, social or governance label. "ESG is a clear driver among corporate issuers overall at the moment," Nordea's Saha said.
First-time issuers EQT and Hennes & Mauritz each sold debut bonds this year, and chose to do so in euros and with sustainability-linked features attached.
Nordic issuance has created extra business for an investment banking community that's faced a decline elsewhere in the euro-bond market.
Bond sales in the single currency from European corporates (including property firms) outside the Nordic region have dropped by about 27 percent when compared to last year, the data show.
Meanwhile, some investors are starting to question whether bond prices in the euro market might have peaked.
Deals are now "priced to perfection", according to Ville Talasmaki, chief investment officer of the newly created USD 2929bn asset management arm of Mandatum.
Talasmaki says the market "leaves no room for error", as even a small increase in yields will hand losses to investors. He also notes that most investment-grade funds are already in the red so far this year.
SEBs Edemalm agrees. "Risks are clearly tilted to the downside as spreads are low and we have got the potential for tapering and rising rates," he said.