Global bond sales surge to record start of year at $586bn

From European banks to Asian corporates and developing-nation sovereigns, virtually every corner of the new issue market is booming, thanks in part to a rally that’s seen global bonds of all stripes surge 4.1% to start the year, the best performance in data stretching back to 1999.

Borrowers looking to raise fresh financing after getting turned away for much of 2022 are suddenly encountering investors with a seemingly endless appetite for debt amid signs inflation is cooling and central banks will call a halt to the harshest monetary tightening in a generation. For many, fixed-income assets are looking increasingly attractive after last year’s historic rout drove yields to the highest since 2008, especially as the prospect of a slowing global economy offers the potential for further gains.

“The run-up in bond prices has legs in our view, particularly when it comes to the investment-grade markets,” said Omar Slim, co-head of Asia ex-Japan fixed income at PineBridge Investments. “Corporate fundamentals continue to be broadly solid,” he said, adding that “the sharp U-turn we’re seeing in Chinese policies will provide a much-needed boost to global growth, mitigating some of the tail risks for emerging markets and providing further support.”

Excess demand for offerings, falling new issue concessions and the largest inflows into high-grade US credit in more than 17 months has helped make this year’s January borrowing so far the busiest ever. Global issuance of investment- and speculative-grade government and corporate bonds across currencies reached $586-billion through to 18 January, the biggest tally on record for the period, according to data compiled by Bloomberg.

Bloomberg Intelligence forecasts US investment-grade bonds will return 10% this year after their worst performance in half a century in 2022. That’s more than double their forecast for US junk debt, as higher-quality notes often benefit more than junk when economies slow. Emerging-market and investment-grade euro-denominated credit should advance 8% and 4.5% respectively, according to the analysts.

Here are some other notable themes seen so far in 2023:

Euro binge 

Bank buffers

Junk’s slow start