Investor Demand Spurs Businesses to Issue More Bonds

As the capital markets brace for potential rate cuts before the end of the new year, investor demand is building for corporate bonds, leading businesses to issue more debt from investment-grade to high yield.

As a Financial Times report indicated, it's been a busy time for corporate bond issuance, which was already a trend to start 2024. However, with stubborn inflation putting rate cuts on the back burner, businesses may have been thinking twice before issuing new debt.

However, the current macroeconomic environment could be tipping back in favor of rate cuts to happen before 2024 turns into 2025. The U.S. Federal Reserve decided to keep rates unchanged again, while slower job growth during April could potentially mean a cooling economy.

Meanwhile, businesses have been taking advantage of investor demand for corporate bonds. In particular, investment-grade debt saw record issuance as the FT report noted, selling "$56.7bn of new bonds across 45 issuances — the largest weekly dollar amount raised since late February and the greatest deal count in two-and-a-half years"