What's the French for desintermediation?

It is no coincidence, according to Bank of America Merrill Lynch, that French issuers made up more than half of total European non-financial bond issuance last month. In a report published this week ("Deleveraging à la française"), the bank's credit strategists point out that French corporate bond issuance has totalled €40 billion since September.

They say the flood of bond issuance reflects the move by corporates away from loan financings as French banks delever. And there could be a lot more French corporate bond issuance on the way, since French and Spanish investment grade corporates together have €500 billion of syndicated loans maturing this year. The report adds that a predicted €100 billion of French corporate bond issuance should be comfortably absorbed by the market. But the authors worry about how the Spanish private sector - facing similar bank deleveraging - will fare in terming out its loans into corporate bonds this year.