Reasons why global bond issuance could slow down next year

Rising rates across asset classes, fewer M&A deals could pose as headwinds

  
Stock market data on screen. Image used for illustrative purpose.

Stock market data on screen. Image used for illustrative purpose.

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Global bond issuance is expected to slow down and fall by 2 percent next year after strong activity in 2020 and 2021, according to S&P’s latest analysis. 

The contraction can be due to perceived headwinds, such as higher rates across asset classes and fewer deals in the mergers and acquisitions (M&A) space. However, other uncertainties, such as the potential infrastructure and tax reform in the US and energy prices, remain and these could impact market sentiment and bond issuance. 

“Some challenges for global bond issuance in 2022 include our belief that rates will rise across most asset classes, a likely reduction in the global corporate mergers and acquisitions pipeline, China’s continued efforts to reduce debt reliance and a return to trend for economic growth,” S&P Global Ratings Research said in a report.  

“Inflation concerns, prospects for rising rates, still-high cash balances, and possible tax reform all translate to headwinds for issuance in 2022,” S&P noted.

While total issuance is expected to contract next year, the projections are still largely in line with long-term growth rates. 

“Although we are forecasting a drop in issuance for 2022, it is still roughly in line with long-term trends in many sectors, rather than a marked correction from heady 2020 and 2021 levels.”

 With financing conditions still favourable across all asset classes, bond issuance this year has remained strong, according to S&P. In the first nine months of the year, issuance reached $6.7 trillion. 

The final quarter is expected to bring the year’s total issuance to “just shy of 2020’s historic level”, according to S&P.  

Some sectors, such as US financial services, could still see stronger fourth quarter activity, which could provide some upside. 

(Writing by Cleofe Maceda; editing by Seban Scaria) 

Cleofe.maceda@refinitiv.com 

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