Corporate Financing Analysis - IG Bond Market To Strengthen In H217 - 31 JULY 2017


After a banner year for activity last year, the global investment grade (IG) bond market was always going to struggle to replicate the same level of deals in 2017, and as of the end of the first-half of 2017, this has proven to be the case. According to Dealogic data, global IG bond activity totalled USD1,789.3bn in H117, which is down by 5% y-o-y from where it stood a year previously. Despite the negative headline number, we highlight that key regions, such as the US, Europe, and Asia (excluding Japan) have all recorded a growth in IG bond market issuance across the same time period: in the US, IG note sales tallied USD796.3bn in the first half (up 3% y-o-y); in Europe, USD525.5bn worth of IG paper was sold (up 4% y-o-y); and in Asia (excluding Japan), such deal activity rose by as much as 60% y-o-y in H117 to reach a level of USD105.6bn.

Corporate Issuance On The Rise
Quarterly Global Investment Grade Bond Activity By Deal Value, USDbn
Source: Dealogic, BMI

Looking ahead across the remainder of the second-half, and with the support of the trio of key regions which have recorded y-o-y growth in deals sold, we believe that IG bond activity will continue to build momentum once more as investors become more comfortable with risk aversion - the result of both macro and micro factors, such as the potential unwinding of post-crisis stimulus in the US and Europe, and equities in key markets appearing extremely overvalued.

While not the busiest sector in terms of overall deal value, the tech sector has produced the three largest corporate global IG bond deals of the 2017 y-t-d period. Topping the table is Microsoft Corporation's USD17bn note sale, priced back on January 30 2017. The deal is followed on the leaderboard by Broadcom Corporation's January 11 bond sale which was valued at USD13.55bn, and Qualcomm Inc.'s USD11bn deal completed more recently on May 19. In total, these deals helped the tech sector record IG bond activity worth USD117.28mn across the y-t-d period (data correct to July 17), which is up from USD100.24mn in such deals recorded across the same period last year.

Meanwhile, ahead of the tech sector in the global IG bond industry leader board are both the finance and utility & energy sectors, the former of which is well ahead in the rankings. Indeed, the finance industry has been busy in the IG bond market this year, with firms from the sector tapping debt capital market investors for as much as USD752.84mn, an increase from USD706.22mn recorded across the same period last year. Quite some way behind in second spot sits the utility & energy industry, which has seen issuance increase from USD126.90mn across the equivalent period in 2016 to activity worth USD140.23mn this year.

While the IG bookrunners will be disappointed by overall activity levels y-o-y in the first-half of 2017, they will take hope from the fact that activity is on the up in the US, Europe, and Asia (excluding Japan). Meanwhile in the y-t-d period, the bragging rights on Wall Street in the IG bond arena are going to JP Morgan, which has maintained its pole position y-o-y by working on 425 deals worth a combined USD118.99bn, ahead of rivals BoA Merrill Lynch (411 deals worth USD116.37bn), and Citi (499 deals worth USD106.83bn), Dealogic data show.