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Corporate borrowers began 2025 with a record $83 billion in dollar bond sales, cashing in on growing investor demand to raise debt ahead of any market volatility caused by Donald Trump's return to power.
Borrowings in the dollar-grade and high-yield bond markets reached $83.4bn on January 8, the highest year-to-date figure since 1990, according to data from LSEG.
High-profile borrowers led the rush, including international banks such as BNP Paribas and Société Générale, auto giants such as Toyota, and heavy machinery manufacturer Caterpillar. US banks they are expected to join the fray later in January after their pay period.
“The market is strong, so there is no need for them to delay. They try to come early,” said Marc Baigneres, general manager of investment-grade investments at JPMorgan.
The rush to sell new debt comes as the spread – the difference between yields corporate debt versus safer government bonds – they are near decade lows, encouraging companies to raise money cheaply while they can.
“There are many risks to the spread – inflation, the economy is slowing, the Fed may stop cutting rates and go ahead with rate hikes,” said Maureen O'Connor, global head of the Wells Fargo group. .
The average US investment-grade spread remained at 0.83 percent on Wednesday, not far above its narrowest point since the late 1990s, according to ICE BOFA.
January is very busy with debt issuance, especially by banks. But the latest deal comes as companies lock in debt ahead of Trump's inauguration – with economists warning that the US president's telegraph policies, including trade tariffs, could raise prices.
On Wednesday, minutes from the last meeting of the Federal Reserve indicated that officials were concerned about inflation and wanted to “careful” and the rate of future deceleration.
Large lenders are under pressure to repay money quickly, with $850bn of high-dollar debt set to mature this year and another $1tn in 2026, according to Wells Fargo figures.
“It's a very attractive market environment” for borrowers, said Dan Mead, head of Bank of America's investment-grade syndicate. “You will continue to see a healthy balance of investor capital and acceptance of new issues coming to market, with prices at attractive spreads leading providers to look to move sooner rather than wait.”
Edward Al-Hussainy, a senior rater and financial analyst at Columbia Threadneedle, said that pension funds and insurance companies are “preferred” at the moment to buy debt.
Banks are often the first to take advantage of narrow spreads and are among the most active issuers to date. But market participants say non-financial borrowers may join soon before the 10-year Treasury yield – the benchmark for global borrowing costs – rises even further. It now sits at around 4.7 percent after rising sharply in recent weeks.
“We have a few significant risk events in January,” O'Connor said, pointing to US jobs data due on Friday, which will give investors clues about the future path of interest rates, and Trump's inauguration on January 20.
“We've heard a lot of negative management about what the market is seeing right after that,” O'Connor said. “I think there is some concern that it could cause another leg up in Treasury yields.” Some “coupon-focused lenders” – meaning companies focus mainly on the gross yield they pay investors – “are trying to get in before that”, he added.
This week's volumes, which were reduced to just three days with short trading hours on Thursday, and payments on Friday, follow the 2024-xa borrowing bonanza. Issuance of global corporate bonds and subsidized loans hit a record $8tn.
While current conditions remain favorable for debt sellers, some buyers say they are now willing to sit on the sidelines until more attractive conditions arise.
“Most deals come at levels that leave little value on the table,” said Andrzej Skiba, BlueBay's US permanent head of RBC GAM. “(It) seems unlikely and we prefer to keep the powder dry to increase possible volatility after the launch, as the market discovers this new policy mix and the Fed's response to that.”