Companies raise over half a trillion dollars of debt in record Jan – Refinitiv

By Yoruk Bahceli

(Reuters) – A file quantity of greater than half a trillion {dollars} of debt was raised in January by corporations as issuers scrambled to benefit from engaging funding situations earlier than world central banks led by the U.S. Federal Reserve start a tightening cycle.

Together with monetary establishments, investment-grade corporations raised $532 billion globally in January, the best quantity on file for the primary month of the 12 months, based on knowledge from Refinitiv relationship again to 2000, eclipsing the earlier file at $530 billion final 12 months.

Within the U.S., essentially the most important supply for issuance, corporations and monetary establishments issued $153.5 billion euros in bonds respectively, the information confirmed, the best since 2017.

“The primary driver is borrowing prices, that are very very low,” mentioned Winnie Cisar, world head of technique at analysis agency CreditSights.

“With the Fed speaking about tightening, charges markets transferring larger I feel issuers are very a lot making an attempt to get forward of regardless of the subsequent leg larger in yields goes to be.”

The issuance is an indication of confidence for the credit score markets, which delivered their worst month-to-month losses since March 2020 in January.

The U.S. Federal Reserve signalled initially of January that it might tighten financial coverage sooner than anticipated, which can additionally embrace shrinking its $8-trillion steadiness sheet.

That has triggered a world sell-off in bond markets and danger property with bond yields rising sharply as merchants priced in practically 5 charge hikes from the Fed over the rest of 2022.

U.S. banks and monetary establishments have been the important thing driver of issuance, elevating $104 billion within the U.S. in a file January.

“We had anticipated to see a deceleration from financials not needing to boost as a lot as capital as final 12 months however a variety of these points are among the many most savvy out there when it comes to navigating borrowing situations,” Cisar at CreditSights mentioned.

Regardless of a 40 bps yield rise on U.S. investment-grade company bonds within the U.S., based on BofA indexes, borrowing prices are nonetheless traditionally low, so corporations can proceed issuing low-cost debt and convey down their total funding prices.

Firms in BofA’s U.S. investment-grade company index may see borrowing prices rise one other 80 foundation factors earlier than they exceed the coupons they pay, based on Refinitiv Datastream.

In distinction have been sub investment-grade corporations, the place after a file run in 2021, bond issuance greater than halved in comparison with final January at $32 billion.

(Reporting by Yoruk Bahceli; Enhancing by Saikat Chatterjee)