REUTERS/Brendan McDermid
Global corporate borrowing surged to a record in 2024 as companies took advantage of increased investor demand and low borrowing costs to issue a mountain of new debt.
According to LSEG data cited by the Financial Times, companies sold $7.93 trillion of bonds last year, up by more than a third from a year earlier.
The deluge of corporate bond issuance marks a new high, shattering the previous annual issuance record set in 2021 before the Federal Reserve started to raise interest rates to tame inflation.
The sales in 2024 came as the Fed and other global central banks began lowering interest rates. Upon the Fed's first interest rate cut of the year in September, global investors flocked to US corporate bonds at the fastest pace in six months following two-consecutive months of outflows from the sector, a recent note from Citi said.
Even before the Fed's easing cycle, strong demand from investors also helped bring down costs, as high-grade corporate debt neared its safest level in nearly a decade.
Corporate giants rushed to take advantage, often looking to bond sales to help fund acquisitions.
Pharma giant AbbVie sold $15 billion in investment-grade bonds last February, helping fund acquisitions of ImmunoGen and Cerevel Therapeutics, while Cisco raked in proceeds of nearly $14 billion from a bond sale in the same month to partly finance its $28 billion acquisition of Splunk.
Bristol Myers Squibb, meanwhile, sold $13 billion in bonds to help fund two other acquisitions.
Going forward, the outlook for corporate borrowing is slightly murkier.
Recent hawkish commentary from Fed officials has hurt hopes for significant monetary easing in 2025. Traders are now penciling in just one or two more cuts over the course of the year amid concerns over sticky inflation.
Citia analysts said they expect a resilient US economy to help provide further growth for investment-grade bonds overall, though.
"Resilience in U.S. economic activity, despite still-restrictive monetary policy, raises the chances from our prior baseline that U.S. IG EBITDA growth can keep pace (in the aggregate, at least) with what we expect will be punchy growth in net corporate IG debt," they said in a December note.
The average spread for investment-grade bonds dipped to its narrowest level in over two decades right after the election, and has widened only slightly since, according to Ice BofA data cited by the Financial Times.
