Global corporate borrowing climbs to record $8tn in 2024

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Global corporate debt sales rose to a record $8tn this year, as companies took advantage of red-hot demand from investors to accelerate their debt plans.

Corporate bond issuance and leveraged loans rose by more than a third to $7.93 trillion by 2023, according to LSEG data, as major companies from AbbVie to Home Depot took advantage of government debt compared to falling to their lowest levels in decades.

Growth in activity reached an earlier peak in 2021 as strong investor demand reduced costs for corporate borrowers, even before the Federal Reserve and other central banks began cutting interest rates from their multi-decade highs.

“The market is firing on all cylinders, and then some,” said John Macauley, head of North American debt capital markets at Citigroup.

Bankers say that this cheap funding cost – at least relative to safer government bonds – initially persuaded companies pull forward They were issued to avoid any market turmoil surrounding the US election. But when spreads tightened in the wake of Trump’s landslide victory, some decided to lock in next year’s borrowing requirements as well.

“Initially it was ‘let’s de-risk our fund for the year,'” said Tammy Serby, co-head of fixed income capital markets at Morgan Stanley. “So it was, ‘Actually the situation looks pretty interesting, why don’t we just push forward to 2025?'”

Pharma giant AbbVie raised $15 billion in an investment-grade bond sale in February to help finance its acquisitions of Immunogen and Cerevel Therapeutics, while other major issuers in 2024 include Cisco Systems, pharma group Bristol-Myers Squibb, beleaguered aerospace giant Boeing and Repot. Report included. .

According to Ice BofA data, the average US investment-grade bond spread narrowed to 0.77 percentage points after the election, the tightest spread since the late 1990s. It has expanded slightly since then. The spread on riskier high-yield corporate bonds has widened since mid-November, but is not far from a 17-year low.

Despite the narrowing spreads, total borrowing costs continued to rise due to the level of Treasury yields, with the yield on investment-grade corporate debt at 5.4 percent, compared with 2.4 percent three years ago, according to BofA data.

Those relatively high yields on corporate debt have attracted large inflows, with investors pouring nearly $170 billion into corporate bond funds globally in 2024, the most on record, according to EPFR data.

Dan Mead, head of investment-grade syndicates at Bank of America, said it was the bank’s busiest year for high-grade dollar borrowing except for 2020, when the Covid stimulus created an issuing frenzy.

“We have published an estimate for each month of what our supply should be. . . And exceeded the actual supply every month [them]” he added.

Even after 2024’s issuance bonanza, many bankers said they expected a steady flow of borrowing next year as companies refinance the wave of cheap loans they secured during the pandemic.

Marc Begnères, global co-head of investment-grade finance at JPMorgan, expects “activity to remain steady” next year. But he highlighted the “wild card” of more substantial, large-scale, debt-financed potential [mergers and acquisitions]”

However, some bankers cautioned that the corporate debt frenzy could slow if it expands meaningfully from current levels.

“The market is pricing in almost no downside risk right now,” added Maureen O’Connor, Wells Fargo’s global head of high-grade debt syndicates. “With spreads pricing in for perfection, you see idiosyncratic risk increase.”