Corporate Treasury Weekly: growth optimism & lower rate volatility are credit-positive

31 March 2021

Giles GaleHead of European Rates Strategy

View bio

Other insights

View more insights

4 minute read

Breaking down trending trades & themes to help corporate treasurers get ahead of the latest issues shaping markets.

The big picture

With our 2021 economic growth estimates recently revised upward on the back of stronger economic data and yet more vaccination progress, we see greater optimism spreading through markets over the coming quarter. We still see bond yields rising, but with lower volatility – which means the environment for credit should remain very good.

This week in headlines

  • Spring is in the air – and growth optimism is spreading: our recently refreshed economic forecasts (more on this in our Q2 outlook next week!) show growth trending above consensus in most cases – we now expect global gross domestic product (GDP) in 2021 to reach 5%, 5.2%, and 7.7% in the Euro Area, the UK, and the US, respectively, mostly on the back of huge fiscal stimulus, pent-up savings & household demand.
  • Markets are settling back down thanks to higher investor interest and less uncertainty: markets worried about central bank meetings, and the auction performance & supply of US Treasuries through much of March. In the short-term, we expect that rates stability can continue.
  • A more dovish Fed is negative for bond yields: excellent vaccine progress (143 million doses administered to date) and a potentially weighty long-term stimulus programme means that recovery optimism and inflation concerns are likely to continue. The Fed has so far taken a more dovish approach to the recovery, and unless that dovishness includes more bond buying – which we don’t see happening anytime soon – we think rates will tilt higher, with 10-year US Treasuries touching 2% by the end of the year.
  • European bond markets are likely to see lower supply and higher demand – which is positive for issuers: the net supply of bonds is likely to swing by around €50 billion per month (against investors, but positive for issuers) for the quarter with heavier buying from the European Central Bank (ECB) and lighter bond sales from governments and firms.
  • More stability in rates and a strong growth outlook are ideal for credit: a positive view on credit is consistent with our above-consensus expectations for economic growth, but it could be derailed by higher rates. For now, valuations do not now seem so out of sync with fundamentals that a volatile ongoing correction is needed.
  • We remain positive on commodity-linked currencies: we think the Aussie dollar, Canadian dollar, Norwegian krone, Colombian peso and the rouble all have room to strengthen.

Trending treasurer trades & talking points

Corporate hybrid bonds continue to attract significant demand with yields that can’t be found elsewhere

Hybrid bonds like that recently issued by Dutch energy grip operator Stedin have seen strong oversubscription – with investors taking a keen interest in the higher yields on offer.

The first combined use-of-proceeds and sustainability-linked bond in European markets was printed last week

The European sustainable finance market took another step forward over the past week with Austrian utility firm Verbund selling the region’s first combined green & sustainability-linked bond. The €500 million 20-year bond combines the feature of environmentally sustainable use of proceeds (green projects) with a coupon step-up (0.25%) linked to company-wide sustainability goals. For more on sustainability-linked bonds (and how they differ from green or plain bonds), click here.

Chart of the week

Economic sentiment continues to match the improving weather (see below). The increase in March was driven by improving confidence in all sectors (i.e. industry, services, retail trade, construction) and among consumers, and were of a magnitude not seen since last summer’s steep recovery following the first phase of the pandemic.

Economic Sentiment Indicator (ESI) improved sharply in March

Sources: European Commission, NatWest Markets

Regular updates & tools to help you get ahead

Regular updates on market moving themes & tools to help your business thrive

For the full weekly newsletter login to Agile Markets. Don’t have access? Contact us here.

Global outlook
Fixed income
Monetary policy

This document has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this document has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this document, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this document. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this document and any issues that are of concern to you.

This document does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in the Netherlands, authorised and regulated by De Nederlandsche Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, the Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, the Netherlands. Branch Reg No. in England BR001029. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (, a SIPC member ( and a wholly owned indirect subsidiary of NatWest Markets Plc.

Copyright 2021 © NatWest Markets Plc. All rights reserved.