US Corporate Bond Issuance Seen Increasing After Yields Slide

• Contrary to initial projections of a recession in the US by the Federal Reserve, the economy showed faster-than-expected progress on inflation, minimal jobless rate increase, and a robust 5 times growth compared to forecasts.
• The unexpected positive economic indicators prompted a shift in Federal Reserve policy towards potential rate cuts, leading to anticipation of a quicker pace of interest rate easing.
• The market now anticipates increased issuance of investment-grade bonds in the coming year, totalling $770Bn in 2024, as companies seek to take advantage of lower borrowing costs resulting from the potential rate cuts.
• Market dynamics have shifted in favour of borrowers, with a combination of lower borrowing costs, tightening credit spreads, and increased investor appetite for riskier corporate debt. This change is influenced by the perception that the Federal Reserve may be concluding its hiking cycle.

(Source: Reuters)