Corporate borrowers are issuing debt at the fastest pace since the pandemic debt binge of 2020, driven by a massive wall of maturing debt, an unpredictable US leader, and falling yields. The annual supply of new investment-grade bonds surpassed $US1 trillion on Tuesday, one day earlier than last year. Refinancing activities, such as Japanese telecom giant NTT’s $US11 billion bridge loan to privatise its data-centre business, and mergers and acquisitions, including Mars Inc’s $US26 billion bond sale to acquire food maker Kellanova, contributed significantly to reaching this milestone.
This week, companies including MSCI Inc and Daimler Truck are entering the blue-chip market. MSCI Inc is a provider of investment decision support tools, including indices, portfolio construction and risk management. Daimler Truck is one of the world’s largest manufacturers of commercial vehicles. These companies are seeking to capitalize on historically low borrowing costs before a seasonal slowdown expected later in August. Many corporate leaders advanced their funding plans last year, anticipating potential market shifts ahead of the US election.
Corporate leaders face the challenge of refinancing over $US1 trillion of debt maturing this year, including a large volume of five-year bonds issued after the Federal Reserve’s initial pandemic interest rate cuts. They have had to navigate abrupt shifts in risk appetite often triggered by trade policy updates from the Trump administration.
These factors have collectively created an environment where companies are compelled to proactively manage their debt obligations, leading to the surge in bond issuance observed this year.
