The corporate debt in 2024 reached a new record close to 8 trillion dollarsa figure higher than the previous high reached in 2021, benefiting from the strong demand by investors, which allowed yields to fall even before the rate cuts made by central banks. This is what the weekend edition of the Financial Times reports on data processed by the London Stock Exchange.
Debt increased by more than a third
In 2024, corporate debt issuance through bonds and other leveraged private placements reached a value of 7,930 billion ba globally, recording an increase of more than a third compared to 2023 levels and marking a new record after the one set in 2021second year of the pandemic.
The reasons for the increase in emissions
The increase in debt – writes the financial daily – is to be attributed to strong demand from investorswhich increased the price of corporate bonds and, in parallel, led to a reduction in yield of the same, which represents a cost for the issuing companies. The reduction in the cost of refinancing has thus pushed numerous companies to accelerate or bring forward emissionswhich therefore reached a record figure.
Spreads at lowest levels for decades
A trend that has begun even before central banks started cutting interest rates (remember that the Fed only started in September 2024 and the ECB a short time earlier during the summer). The cost of bond financing for large companies has therefore fallen to the lowest level in decadesat least compared to the higher cost of public debt.
The average spread of “investment grade” bonds in the USA it was reduced to just 0.77 percentage points immediately after the elections, reaching its lowest level since the late 1990s, it then recovered somewhat in the period immediately following, but remains close to the lows of the last 17 years.
Trump effect and Federal Reserve
Triggering the increase in corporate emissions several factors contributeddetermined first by a precautionary effect, then by convenience.
At first, the lower cost of financingcompared to that of public bonds, has persuaded many companies to accelerate their issues, even for avoid turbulence expected in conjunction with the Presidential electionswhich brought former President Donald Trump back to the White House.
Afterwards, the Fed effect took overwhich cut interest rates by 50 basis points for the first time in September, triggering a further acceleration in corporate issuance, a increasingly convenient conditionswhich have convinced many companies to bring forward their planned operations to 2025.
