The US corporate bond market exploded back into life in March, despite macroeconomic risks such as the war in Ukraine and concerns around stagflation.
The exceptionally strong month of issuance was buoyed by a high volume of investment-grade supply, with US investment-grade corporate bond issuance reaching $235.7bn in March, according to data from the Securities Industry and Financial Markets Association (Sifma). The month’s supply was up from $85.1bn in February and $202.8bn in March 2021.
In contrast, US high-yield bond issuance was far from impressive, with $10.6bn of supply in March, according to Sifma. This was only marginally up from $9.6bn in February and down significantly from $62.7bn in March last year.
BNP Paribas expects US investment-grade supply to reach $1.5bn in 2022, up 1% from 2021; but the bank has downgraded its supply forecast for this year’s US high-yield supply to $243bn, down by 52% from last year. This is due to rising funding costs for sub-investment-grade corporates, making refinancing no longer an attractive option.
The strong supply of US investment-grade bond issuance this year has been driven by above average supply from financials, who have front-loaded supply ahead of expected higher rates. However, BNP Paribas expects financials supply to decrease by 22% in 2022, while non-financial corporate supply ramps up.
