Monetary policies and inflation: Key factors shaping the bond market in 2025

BBVA Corporate & Investment Banking (CIB) enters 2025 with the strength of an exceptional 2024 in the Spanish bond market, where it secured the second position in LSEG’s ranking with €10.45 billion in underwritten deals. Its leading role in key transactions, including bond issuances for major companies such as Telefónica and Iberdrola, as well as its commitment to innovation in green bonds and M&A financing, highlights its ability to steer the market in a year marked by uncertainty and the growing importance of sustainability.

​2024: A record year for bond issuance

The year 2024 saw an unprecedented volume of bonds by Spanish issuers over the past decade, surpassing €130 billion. This milestone was driven by ECB rate cuts, which created a favorable environment for long-term and subordinated bond issuances, expanding the range of issuers accessing the market. Investor demand for Hybrids and Tier 2 instruments intensified, seeking to maximize returns in a low-rate environment.

In this context, BBVA CIB secured the second position in Spain’s bond market rankings, according to LSEG data, with €10.45 billion of bonds underwritten. This strong performance, coupled with its leadership in the loan market, has propelled the bank to remain among the top players in capital markets for the third consecutive year—a testament to its strength and capabilities in market leadership.

Due to the sector’s dynamism in 2024, Spain’s corporate bond market reached €28 billion, doubling the volume issued in 2023. High-yield M&A transactions, such as Zegona’s acquisition of Vodafone Spain and the MásMóvil-Orange Spain merger, further boosted this growth. Meanwhile, the ESG bond market continued to consolidate, with €22 billion in issuances, highlighting the rise of private placements in green bonds.

However, geopolitical complexities—including the U.S. elections and conflicts in Ukraine and the Middle East—added uncertainty, prompting investors to seek refuge in fixed income. This shift reinforced capital inflows into fixed-income funds over equities. Credit inflows in 2024 reached their highest levels since 2010, and in our view, they will remain a key technical support factor in 2025.

​BBVA: A Key Player in Major Transactions

BBVA CIB played a fundamental role in standout bond market transactions in 2024. The bank acted as bookrunner in FCC Servicios Medio Ambiente’s green bond issuance, Telefónica’s hybrid bond, Iberdrola’s jumbo issuance, and Repsol’s return to capital markets. Additionally, BBVA was instrumental in significant public and financial sector transactions, such as Spanish Treasury issuances, Abanca’s Tier 2 subordinated bond with a simultaneous buyback of a previous bond, and Ibercaja’s inaugural green bond issuance. These deals showcase BBVA’s expertise in structuring and executing complex, large-scale transactions.

Outlook for 2025: Navigating Uncertainty

In 2025, credit market trends will be shaped by monetary policies in Europe and the U.S., in response to economic growth, inflation, and to the impact of U.S. trade policy. The evolution of these factors will influence investor appetite for long-term or subordinated bonds.

In the corporate segment, hybrid corporate bond issuances, long-term senior debt, and high-yield transactions are expected to continue growing. In the financial sector, activity will focus on refinancing maturities, with an increase in senior debt issuances. A major development in 2025 will be the introduction of EU Green Bonds, aligned with the new European Union regulatory framework, implemented last December. Spanish Issuers expected to be active include those from Utilities, Construction and Public sectors

In conclusion, while 2025 presents a complex landscape for the bond market, it also offers opportunities for both investors and issuers. BBVA’s experience, leadership, and strategic vision position it to navigate challenges and capitalize on emerging opportunities in the evolving market environment.