Global corporate borrowing climbs to record $8tn in 2024

Global corporate obligation sales soared to a record $8tn this year, as companies took advantage of red-warm demand from investors to accelerate their borrowing plans.

Issuance of corporate bonds and leveraged loans climbed by more than a third from 2023 to $7.93tn, according to LSEG data, as large companies from AbbVie to Home Depot took advantage of borrowing costs falling to their lowest level in decades relative to government obligation.

The surge in activity passed a previous peak in 2021, as powerful investor demand drove down costs for corporate borrowers even before the Federal safety net and other central banks started cutting earnings rates from their multi-decade highs.

“Markets are firing on all cylinders, and then some,” said John McAuley, Citigroup’s head of obligation stake distribution markets for North America.

Bankers declare those cheap financing costs — at least relative to secure national securities — initially persuaded companies to pull forward their issuance to avoid any economy turbulence around the US election. But when spreads tightened further in the wake of Trump’s resounding win, some decided to lock in next year’s borrowing needs, too.

“Initially it was just about ‘let’s de-uncertainty our financing for the year’,” said Tammy Serbée, Morgan Stanley’s co-head of predictable returns stake distribution markets. “Then it was, ‘Actually conditions look pretty attractive, why don’t we just pull forward 2025 as well?’”

Pharma giant AbbVie raised $15bn from an resource-grade predictable returns sale in February to assist pool its acquisitions of ImmunoGen and Cerevel Therapeutics, while other large issuers in 2024 included Cisco Systems, pharma throng Bristol Myers Squibb, beleaguered aerospace giant Boeing and retailer Home Depot.

The average US resource-grade predictable returns spread shrank to as little as 0.77 percentage points in the aftermath of the election, the tightest gap since the late 1990s, according to Ice BofA data. It has since widened only slightly. Spreads on riskier high-profit corporate bonds have widened more since mid-November, but also remain not far from 17-year lows.

Despite the narrow spreads, total borrowing costs remain elevated due to the level of Treasury yields, with yields on resource-grade corporate obligation at 5.4 per cent, compared with 2.4 per cent three years ago, according to BofA data.

Those relatively high yields on corporate obligation have attracted large inflows, with investors pouring almost $170bn into global corporate predictable returns funds in 2024, according to EPFR data, the most on record.

Dan Mead, head of lender of America’s resource-grade syndicate, said it had been the lender’s busiest year for high-grade dollar borrowing apart from 2020, when Covid stimulus sparked an issuance frenzy.

“We put out an approximate for each month about what we expected supply should be . . . and every month the actual supply has exceeded [them],” he added.

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

Marc Baigneres, global co-head of resource-grade finance at JPMorgan, expects “activity will remain steady” next year. But he also highlighted the “wild card” of “the potential for more significant, large-scale, obligation-financed [mergers and acquisitions].”

However, some bankers cautioned that the corporate borrowing frenzy could leisurely if spreads widen meaningfully from current levels.

“The economy is pricing almost no downside uncertainty correct now,” added Maureen O’Connor, global head of Wells Fargo’s high-grade obligation syndicate. “With spreads priced to perfection, you are seeing idiosyncratic uncertainty pick up.”