Global bond issuance was down year-on-year (YoY) in 3Q23, while volumes also softened sequentially. High interest rates and relatively punitive coupon costs compared with the previous low interest-rate era have made it more attractive for issuers to refrain from near-term refinancings. M&A activity has also been constrained. In addition, the relatively medium-term maturity wall for issuers, particularly in Europe, means many companies have no urgent necessity to refinance.

Global supply in the first nine months of 2023 was down only marginally from 9M22, according to Dealogic data. Issuance volumes stood at USD 5.162trn for 9M23, as opposed to USD 5.346trn in 9M22. Global 3Q23 volumes of USD 1.385trn were down sequentially compared with USD 1.957trn in 1Q23 and USD 1.818trn in 2Q23. However, this can partly be explained by the seasonal impact of a quieter August issuance holiday period, with 3Q23 volumes dipping only around 2.9% YoY.

The Ryder Coupon result

There has been divergence in issuance volumes across regions. EMEA has been the regional outperformer, with bond issuance up YoY in 2023 year-to-date (YTD). EMEA bond issuance over the first nine months of USD 1.868trn represents a rise of 13.8% YoY. This compares with an 11.5% YoY drop for the Americas to USD 1.927trn and a 10.3% YoY fall for the Asia-Pacific region to USD 1.365trn.

The European market backdrop has been more benign in 2023 than it was last year. Credit markets had a tough 2022, with the BofA European high-yield (HY) index recording 12.0% negative total returns as the asset class suffered heavy outflows. This made participating in new deals less compelling given more attractive relative value in a beaten-up secondary market. Issuers also baulked at potential high coupon costs. However, in 2023, the BofA European HY index has delivered total returns of 5.7% YTD, as the market rebounded and some primary new-issue premiums can offer a more compelling relative value versus a secondary market that has started to bounce back. Issuers have subsequently been able to price deals at relatively lower yields than a few quarters ago. Note, though, that there remains a cautious tone ahead, with HY funds recently having had 12 weeks of fund outflows in a row, according to a BofA report.

Corporate; financial institutions; sovereign, supranational and agency (SSA); and asset/mortgage-backed bond volumes all reduced sequentially, while the total of these issuance asset classes was also down YoY. Corporate bond deals for 9M23 were USD 1.674trn, a rise of 6.2% YoY. Financial institutions’ bond deals fell 7.2% YoY to USD 1.637trn. SSA bond deals climbed to USD 1.276trn, gaining 7.5% YoY, while asset/mortgage-backed bond deals tumbled 29.6% YoY to USD 573.6bn.

Focusing more on 3Q23 issuance numbers, corporate bond deals for the quarter were USD 449.9bn, a gain of 3.9% YoY; financial institutions’ bond deals of USD 461.2bn slipped 4.8% YoY; SSA bond deals of USD 285.6bn were down 8.1% YoY; and asset/mortgage-backed deals reached USD 187.9bn, a drop of 5.1% YoY.

Some sectors have boosted issuance volumes. Excluding finance and government bond sectors, leading corporate sectors in the YTD include bonds from: Utilities & Energy, Auto/Truck, Construction/Building and Real Estate/Property. Utilities & Energy had USD 271.9bn of bond issuance in 9M23, Auto/Truck had USD 223.3bn, Construction/Building had USD 145.0bn, and Real Estate/Property had USD 131.3bn.

One trend evident in 3Q23 was a decline in global ESG bond issuance, which decreased YoY and sequentially compared with 1Q23 and 2Q23. Total 3Q23 ESG bond issuance, split between Green, Sustainability and Social bonds, was USD 1.38bn for 3Q23, tightening 2.9% YoY. In 3Q23, Green bond issuance was USD 84.2bn, plunging 24.2% YoY; Sustainability bond issuance contracted 24.6% YoY to USD 33.9bn; while Social bond issuance slipped to USD 20.7bn, down 10.9% YoY.

HY bond market issuance ticked up YoY in 9M23 though issuance volumes remain well below the bumper issuance years of 2020 and 2021, which were supported by the low interest-rate environment and backdrop of previous central bank support. Primary HY markets were also effectively shut for much of last year because of volatility following Russia’s invasion of Ukraine and the increasingly pessimistic economic outlook, which means issuance volumes this year are up against a soft comparable YoY. Global 9M23 HY issuance totalled USD 266.1bn, up 40.6% YoY vs USD 189.2bn in 9M22, though it remains below USD 755.8bn posted in 9M21 and USD 620.2bn in 9M20.

Refinancing in the current market will involve relatively high interest costs, but several issuers have upcoming debt maturities. Globally (the Americas, APAC and EMEA combined), out of USD 68.076trn of debt outstanding, USD 1.078trn of debt matures in 2023, USD 5.565trn in 2024, USD 5.966trn in 2025 and USD 5.636trn in 2026.