NEW YORK--(BUSINESS WIRE)--Changes to the now-$5.1 trillion US corporate bond market's rating mix continue to be driven by strong and shifting issuance patterns, according to Fitch Ratings. A rebound in financial institution activity, supporting commercial and consumer loan growth and refinancing needs, has been especially significant in 2014.
High grade financial institutions sold $234 billion in bonds in the first three quarters of the year, a 17% year-over-year increase.
Financial momentum has boosted the ranks of bonds rated 'A' and helped stabilize the U.S. corporate bond market's rating mix to a 78% investment grade, 22% speculative grade split.
The U.S. corporate bond market grew 7% in the first nine months of the year, with industrial volume of $3.5 trillion up 5%, and financial volume of $1.5 trillion, up 10%.
The market is 41% larger than in 2009. The bulk of the $1.5 trillion in new post crisis bonds has originated from industrial entities with some notable concentrations: energy has added $219 billion (up 85%), healthcare and pharmaceuticals $188 billion (up 87%), computers and electronics $153 billion (up 130%), and food, beverage, and tobacco $101 billion (up 73%).
The low interest rate environment continues to benefit corporate borrowers. The average fixed-rate financial coupon was down to 4.66% at the end of the third quarter, compared with 4.93% at the beginning of the year, while the average industrial coupon slipped to 5.35% from 5.58%.
Since 2009, the average financial coupon is down 24% and the average industrial coupon, 22%.
The par value of U.S. corporate bonds affected by either downgrades or upgrades, 2.0% and 1.9%, respectively, through third-quarter 2014, remains firmly in neutral and subdued territory in 2014.
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.
Applicable Criteria and Related Research: U.S. Corporate Bond Market Monitor (Quiet on the Rating Front, Financial Issuance Contributes to Growth)