NEW YORK & LONDON--(BUSINESS WIRE)--U.S. non-financial corporate bonds are on pace to beat 2012's issuance record of $686 billion, highlighting the diverging growth path of the US and European economies, according to Fitch Ratings.
U.S. non-financial volume totaled $115.7 billion through the end of February, an 18% increase over the first two months in 2012 and a 30% increase compared with 2014. This contrasts sharply with the 21% decline in European corporate issuances for the first two months of this year.
U.S. companies continue to take advantage of favorable borrowing conditions against a low interest rate backdrop and are refinancing debt, causing the par weighted average coupon fixed-rate universe to fall from 6.4% at the end of 2011 to 5.2% as of the end of February. New issuance has averaged more than $650 billion over the past three years, with $188 billion sold during 4Q14.
So far this year, borrowing has been strong in both the investment- and speculative-grade segments, up around 30% versus 2014. The former generated $81.5 billion of issuance, while the latter produced $34.2 billion. Energy, utilities and infrastructure (EUI) volume has nearly doubled from the same time frame last year despite the low oil price environment and now comprises 25% of non-financial outstandings. Retail, leisure and consumer products (RLCP) jumped 33%.
European corporate bond issuances fell by over one-fifth to EUR52bn in 2M15 compared with last year; however, the decline was mainly attributable to an outsized bond offering from EDF in January 2014. Average monthly issuance in 2M15 was down 14% on the monthly average in 2014, with the industrials and RLCP sectors experiencing the biggest falls.
EUI sector firms led new supply with EUR17bn in 2M15 despite a fall of 31% yoy, while supply from issuers in the RLCP segment grew 31% to EUR13bn.
Fitch forecasts the U.S. economy to grow 3.1% this year, significantly ahead of the eurozone at 1.1%. Continuation of ultra-loose monetary policy and the ECB's new EUR1.1 trillion QE program have created very cheap funding conditions in the eurozone. These are increasingly being tapped by U.S. and other foreign issuers. Fitch will publish reports on foreign borrowers tapping European markets and U.S. corporate bond market issuance and rating trends in March.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
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