Companies sold a record $8 trillion in bonds last year amid strong demand and lower borrowing costs

• Companies sold bonds worth 7.93 trillion dollars last year, which is more than a third more than a year earlier.

• The growth in corporate borrowing comes amid increased investor demand and low borrowing costs.

• Corporate giants such as AbbVie, Cisco and Bristol Myers Squibb have tapped the debt markets to help finance acquisitions.

Global corporate borrowing rose to a record in 2024 as companies took advantage of increased investor demand and low borrowing costs to issue mountains of new debt.

According to LSEG data cited by the Financial Times, companies sold $7.93 trillion bonds last year, which is more than a third more than the year before.

The deluge of corporate bond issuance hit a new high, shattering the previous annual record for issuance set in 2021 before the Federal Reserve began raising interest rates to tame inflation.

The 2024 sell-off occurred when the Fed and other global central banks began lowering interest rates. Following the Fed’s first rate cut of the year in September, global investors flocked to US corporate bonds at the fastest pace in six months after two straight months of outflows from the sector, according to a recent Citi note.

Even before the Fed’s easing cycle, strong investor demand has also helped keep costs down, e.g high corporate debt approached the safest level in almost a decade.

Corporate giants have been quick to take advantage, often seeking bond sales to help finance acquisitions.

Pharmaceutical giant AbbVie sold $15 billion in investment bonds last February, helping to fund its acquisitions of ImmunoGen and Cerevel Therapeutics, while Cisco raised nearly $14 billion in bond sales in the same month to partially fund its $28 billion acquisition of Splunk .

Bristol Myers Squibb, meanwhile, sold $13 billion in bonds to help finance two other acquisitions.

Going forward, the outlook for corporate borrowing is a bit murkier.

Recently hawkish comment from Fed officials hurt hopes for significant monetary easing in 2025. Traders now plan for just one or two more cuts over the course of the year amid concerns about sticky inflation.

Still, Citi analysts say they expect a resilient U.S. economy to help overall investment-grade bonds grow further.

“The resilience of US economic activity, despite still tight monetary policy, increases the chances from our previous baseline that US EBITDA IG growth can keep pace (at least overall) with what we expect to be strong growth in IG’s net corporate debt,” they said in a December note.

The average spread for investment-grade bonds fell to its lowest level in more than two decades immediately after the election and has widened only slightly since then, according to Ice BofA data cited by the Financial Times.

Read the original article at Business Insider