Bond issuance up, driven by accelerated refinancing.

While global bond issuance was strong in the first half of 2024, that’s expected to slow a bit in the back half of the year, as rising market volatility and soft merger and acquisition (M&A) volumes weigh on corporate debt activity, says S&P Global Ratings.

In a report released, the rating agency said global bond issuance was up by 13% in the first six months of 2024 to US$4.7 trillion amid strong demand for refinancing, and as borrowers sought to raise new debt ahead of rising uncertainty.

The U.S. public finance segment led the way, with issuance up 33.2% in the first half, followed closely by global structured finance, which was up 28.3%, S&P reported.

Much of the strong issuance was due to refinancing activity, the report noted.

“The relative lack of net new issuance for expansionary financing provides a qualification to the strong absolute levels of issuance in the first half,” S&P said.

With some debt refinancing activity being pulled into the first half, the pace of new issue activity is likely to ease in the second half of the year, resulting in a 9% increase to about US$8.3 trillion for the full year, the report noted.

“While markets are increasingly optimistic about interest-rate cuts ahead, residual concerns around economic resilience, an accelerated pace of refinancing, still modest merger and acquisition (M&A) activity, and continued fears of uncertainties that could raise market volatility later this year provide offsets,” S&P said.

Geopolitical risks remain elevated, with a large number of elections taking place this year and ongoing conflicts in Ukraine and the Middle East, which may also impact bond issuance activity, the report noted.

S&P said M&A activity has been stabilizing this year “but at lower average levels,” with many deals “being financed via equity, limiting upside for issuance growth as a funding source.”

As global interest rates fall over the next 12 months, M&A activity is expected to pick up too, which may ultimately boost bond issuance too, the report suggested.