Germany-based real estate group Vonovia’s EUR 1.3bn dual-tranche convertible bond (CB) has increased hope of a revival of the European CB market in the first half of 2025.

CB volumes reached USD 5.56bn in 1H2025 YTD, also boosted by issuance from Fresenius SE & Co KGaA (USD 641m) and Euronext (USD 480m). This marks a significant increase from USD 3.5bn during the same period in 2024, according to Dealogic data.

Vonovia’s offering—the largest ever European real estate convertible— has lifted market sentiment, according to sources.

“The market never completely shut down. We saw a few deals last year and earlier this year—but quality has been lacking, with many transactions being either synthetic structures issued by banks (such as Citigroup Global Markets Holdings’ USD 391m exchangeable bond in Airbus Group SE) or non-dilutive CBs (VINCI’s €150m CB),” an ECM banker said. “Vonovia stood out because it was investment grade, large cap, index-eligible, and, most importantly, fresh paper.”

The market is hopeful that Vonovia’s benchmark deal will pave the way for further primary activity. Early signs are encouraging.

Euronext, the pan-European exchange operator, priced a EUR 425m CB on 22 May – its debut in the convertible market.

The potential recovery comes after last year’s volumes failed to meet expectations despite supportive market conditions. Total issuance in 2024 reached just USD 6.1bn, down sharply from USD 14.4bn in 2023.

While cautious optimism is warranted, the lack of new issuers remains a structural headwind.

Nevertheless, market participants note a visible improvement in sentiment and issuer engagement.

“The European CB market is gaining traction on the back of recovering share prices and still-elevated volatility, and with improved issuer engagement, similarly large deals are likely to emerge soon,” an equity-linked banker concluded.