The conditions seem ripe for another robust year in the European bond market. The region’s debt crisis has eased significantly in recent months and the European Central Bank appears determined to keep interest rates at today’s extraordinarily low levels, if not cut them further. The only thing lacking is supply.

The bond market has gotten off to a comparatively sluggish start since the beginning of the year. Companies had made 23 bond issues worth a total of $26.4 billion as of January 16, down from 55 issues worth $35.8 billion in the same period of 2012. Many investors expect the pace of issuance to remain subdued this year as companies remain flush with cash after a spate of borrowing in 2012. For investors the tightening supply is likely to make it even harder to find significant yields. (While that applies to large issuers, Standard & Poor’s says smaller European companies are in a much different position.)

Last year companies tapped the European corporate bond market for a total of $582.4 billion, up sharply from $375.3 billion in 2011 and not far behind 2009’s record of $638.6 billion, according to Dealogic. Andreas Berndt, executive vice president and portfolio manager in the Munich office of Pacific Investment Management Co., the big U.S. bond fund manager, says that investors were looking for yield and keen to diversify their portfolios.

Such demand enabled large European corporates to borrow at extraordinarily low rates. In July, Swiss food company Nestle, for instance, set a new record for the lowest coupon — 1.5 percent —­ on a ten-year European corporate bond. With German ten-year bonds yielding a mere 1.32 percent by the end of 2012 after starting the year at an already low 1.85 percent, Nestle’s coupon was enough. According to Bank of America Merrill Lynch’s Euro Corporate index, European corporate bonds at the start of 2013 were yielding only 137 basis points more than government debt on average, down sharply from 301 basis points a year ago.

Interest rates and government bond yields are likely to stay down for some time. The ECB’s main refinancing rate stands at the record low level of 0.75 percent, and the next move could well be further downward given the sluggish performance of European Union economies. The German Economy ministry estimates that the country’s output grew by only 0.8 percent in 2012 after a 3 percent increase in 2011. In a press conference in Frankfurt in December, ECB president Mario Draghi said the bank’s governing council had discussed cutting rates although the “prevailing consensus” was to leave them unchanged. On January 10 the bank’s governing council voted unanimously to keep rates at the same level. Against this backdrop, some analysts, such as Dan Morris, global strategist at J.P.Morgan Asset Management in London, believe that investors will prefer risk assets such as equities and higher-yielding fixed income this year.