Corporate loans begin 2025 with a record bonanza of $83 billion

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Corporate borrowers began 2025 with a record $83 billion in dollar bond sales, capitalizing on brisk investor demand to raise debt ahead of any market volatility sparked by Donald Trump’s return to power .

Lending in the investment-grade and high-yield bond markets in US dollars reached $83.4 billion as of January 8, the highest figure since 1990, according to data from LSEG.

High-profile movers led the race, including international banks such as BNP Paribas and Société Générale, auto giants such as Toyota and heavy machinery maker Caterpillar. banks of the United States they are expected to join the fight later in January after their earning season.

“The market is strong, so there is no need to delay. They are trying to come as soon as possible,” said Marc Baigneres, global co-head of investment finance at JPMorgan.

The rush of new debt sales comes as spreads – the difference between yield corporate debt versus safer government bonds — are near multi-decade lows, prompting companies to raise funds on the cheap while they can.

“There are a lot of risks to spreads — inflation rising, the economy slowing, the Fed potentially pausing rate cuts and even moving to raising rates,” said Maureen O’Connor, head Wells Fargo’s global high-quality debt syndicate. .

The average US investment spread stood at just 0.83 percentage points on Wednesday, not much above its tightest point since the late 1990s, according to ICE BOFA.

January is typically busy for debt issuance, especially by banks. But the latest blow to the deal comes as companies lock down cheaper debt ahead of Trump’s inauguration – with economists warning that the incoming US president’s telegraphed policies, including trade fees, could be inflationary.

On Wednesday, the minutes of the last Federal Reserve meeting showed that officials were still concerned about inflation and wanted to be “attention” with the pace of future rate cuts.

Large lenders are also under pressure to refinance quickly, with $850 billion of high-quality dollar debt maturing this year and another $1 billion in 2026, according to Wells Fargo calculations.

“It’s a very attractive market environment” for loans, said Dan Mead, head of the investment syndicate at Bank of America. “We continue to see healthy investor cash balances and receptivity to new issues coming to market, and prices at very attractive spreads that lead to issuers looking to move sooner rather than later.”

Edward Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle, said pension funds and insurance companies were “exceptionally willing” at the moment to buy debt.

Banks are typically the first to benefit from tight spreads and are among the most active issuers so far. But market participants said non-financial borrowers could join the race before the 10-year Treasury yield – a benchmark for global borrowing costs – rises further. It now stands at around 4.7 percent after a sharp climb in recent weeks.

“We have a couple of pretty critical risk events in January,” O’Connor said, pointing to Friday’s U.S. jobs data, which offered investors clues about the future path of interest rates. interest, and the inauguration of Trump on January 20.

“We’ve heard quite a bit of rhetoric from the incoming administration about what the market could see quickly in the back,” O’Connor said. “I think there is concern that it could catalyze another leg higher in Treasury yields.” Some “coupon-focused lenders” — meaning companies focused primarily on the total return they pay investors — “are trying to get ahead,” he added.

This week’s volumes, which were condensed to just three days from reduced trading hours on Thursday, and Friday’s wages, followed by a loan bonanza in 2024 – when Global issuance of corporate bonds and leveraged loans reached a record $8 billion.

While current conditions remain favorable for debt sellers, some buyers said they were now willing to sit on the sidelines until more attractive conditions emerged.

“Most deals come at levels that leave very little value on the table,” said Andrzej Skiba, head of BlueBay US fixed income at RBC GAM. “(It) looked rather unattractive and we prefer to keep the dust dry for a potential increase in volatility after the inauguration, as the market discovers this new policy mix and the Fed’s response to it.