Bond sales running at record pace

Issuance reaches $747bn, a record in the year to date, on the back of corporate debt sales

Chelsea Bruce-Lockhart in London and Joe Rennison in New York

Bond sales are booming in 2019, running at a record pace globally for the year so far, as a pivot in monetary policy among the world’s central banks prompts a fresh binge in corporate borrowing.

Global corporate bond issuance has reached almost $747bn for the year to Monday, according to data from Dealogic, edging ahead of the previous record of $734bn issued over the same time period in 2017, which ended up being the biggest year on record for new debt sales.

A sharp U-turn in global monetary policy, with the Federal Reserve pausing further interest rate increases in the US and the European Central Bank committing to reviving growth, has breathed life into corporate debt markets.

“It is clear that the credit cycle and debtors have been given a reprieve due to the dramatic reversal from the likes of the Fed and ECB,” said Kristina Hooper, chief global market strategist at Invesco. “Central banks have moved almost in lockstep in terms of changing their policy stance.”

After a period of policy tightening, the shift among central banks spells a return to the ultra-accommodative approach that boosted debt issuance in the years after the financial crisis and prompted companies to take advantage of low interest rates by borrowing more from investors.

The scale of indebtedness has caused concern among some policymakers and investors, with the International Monetary Fund warning this month that it could “amplify” an economic downturn.

In the US, the growth of lower-rated, “triple-B” company debt has caused particular consternation, with some of the most indebted companies committing to a debt diet in 2019 in an attempt to reduce leverage. On Monday, AT&T sold 9.5 per cent stake in television streaming service Hulu back to the company for $1.43bn, committing to use the funds to pay down debt.

The moderation of large US companies issuing new debt has tilted new sales towards the rest of the world, with companies like state-owned oil group Saudi Aramco and Belgian brewer Anheuser-Busch InBev in the market with bumper deals this year.

“It looked like that party had ended but now we have a stay of execution and we are seeing a revival of global bond issuance,” said Ms Hooper.

0 comentarios:

Publicar un comentario