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Corporate borrowers kicked off 2025 with a record $83 billion in dollar bond sales, capitalizing on strong investor demand to take on debt ahead of any market volatility triggered by Donald’s return to power Trump.
Borrowing in the U.S. dollar investment-grade and high-yield bond markets reached $83.4 billion on Jan. 8, the highest figure since 1990, according to LSEG data.
Prime borrowers led the rush, including international banks such as BNP Paribas and Société Générale, auto giants such as Toyota and heavy machinery maker Caterpillar. American banks are expected to join the fray later in January after earnings season.
“The market is strong, so they don’t need to delay.” They’re trying to get in as early as possible,” said Marc Baigneres, global co-head of investment grade financing at JPMorgan.
The rush for new debt sales occurs in the form of spreads – the difference between the yield of the corporate debt relative to safer government bonds – are near multi-decade lows, prompting companies to raise money cheaply while they can.
“There are many risks to spreads: accelerating inflation, slowing the economy, possible suspension of rate cuts by the Fed and even a switch to rate hikes,” said Maureen O’Connor, global head from Wells Fargo’s investment grade debt syndicate. .
The average spread between investment-grade securities in the United States stood at just 0.83 percentage points on Wednesday, slightly above its narrowest point since the late 1990s, according to the ICE BOFA.
The month of January is generally busy with debt issuance, particularly by banks. But the latest deal comes as companies take on debt cheaply ahead of Trump’s inauguration – with economists warning that policies announced by the new US president, including trade tariffs, could be inflationary.
Minutes from the latest Federal Reserve meeting on Wednesday showed officials were also concerned about inflation and wanted to be “careful” in line with future rate cuts.
Large borrowers are also under pressure to refinance quickly, with $850 billion of investment-grade debt set to mature this year and another $1 trillion in 2026, according to Wells Fargo calculations.
“It’s a very attractive market environment” for borrowers, said Dan Mead, head of Bank of America’s investment grade syndicate. “You continue to see healthy cash balances and investor receptivity to new issues coming to market, as well as pricing at very attractive spreads that incentivize issuers to look to get there sooner rather than wait. »
Edward Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle, said pension funds and insurance companies were “exceptionally predisposed” at the moment to buy debt.
Banks are generally the first to benefit from narrow spreads and are among the most active issuers to date. But market participants said non-financial borrowers could join the rush before the 10-year Treasury yield – a benchmark for global borrowing costs – rises further. It now stands at around 4.7 percent after rising sharply in recent weeks.
“We have some pretty critical risk events in January,” O’Connor said, pointing to U.S. jobs data due Friday, which will offer investors clues about where interest rates will move in the future. , and Trump’s inauguration on January 20.
“We’ve heard quite a bit of talk from the new administration about what the market might see quickly as a result of this,” O’Connor said. “I think there is concern that this could catalyze a further rise in Treasury yields.” Some “coupon-focused borrowers” – that is, companies that focus primarily on the total return they pay to investors – are “trying to move forward,” she added .
This week’s volumes, which were condensed to just three days due to shortened trading hours on Thursday, and Friday’s payrolls, follow a borrowing bonanza in 2024 – when global corporate bond and leveraged loan issuance hits record $8 trillion.
Although current conditions remain favorable for debt sellers, some buyers said they are now willing to stay on the sidelines until more attractive conditions arise.
“The vast majority of trading is happening at levels that leave very little value on the table,” said Andrzej Skiba, head of BlueBay U.S. fixed income at RBC GMA. “[It has] This looked rather unappealing and we prefer to keep the powder dry for a potential increase in volatility after the inauguration as the market learns about this new policy mix and the Fed’s response to it.
