New global corporate bond issuance in the first half of 2009 reached a record $1.79 trillion, surpassing the previous record of $1.74 trillion set during the same period in 2007, said an article published today by Standard & Poor's.
The sharp rise in bond issuance in 2009 is in contrast to the months leading up to and following the Lehman Brothers' bankruptcy filing in September 2008, when investors were very hesitant to absorb even highly rated issues. New bond issuance in the third quarter of 2008 fell to $387 billion, the lowest level since the fourth quarter of 2002, largely attributable to a significant slowdown in issuance activity in the U.S. and Europe, according to the article, titled "Global Credit Comment: Soaring Demand For Highly Rated Debt Is Pushing Bond Issuance To Record Levels (Premium)."
In an effort to unclog the credit markets, governments and central banks around the globe put in place various programs that were directly and indirectly aimed at restoring investor confidence and spurring lending activity.
By the fourth quarter of 2008 (particularly beginning in November and December), these government programs were starting to take hold and new bond issuance climbed back up to $494 billion in fourth-quarter 2008, $935 billion in first-quarter 2009, and $855 billion in second-quarter 2009.
"Facing a deep recession and a financial market in turmoil, it is no surprise that investors look for quality credits as they reenter the markets," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "This has allowed higher-rated entities to come to the market for capital, even as other lower-rated companies find it challenging to find an audience."
Of the $1.79 trillion of new corporate bond issuance in 2009, about 30% is issued by entities with some sort of government guarantee. This helped stimulate investment-grade issuance, accounting for more than 80% of total issuance, significantly higher than 72% in 2008 and 69% in 2007. The proportion of issuance at the 'AAA' level--a common rating assigned to government-guaranteed issuance--reached 31% in 2009, from just 13% in 2008 and 9% in 2007. Conversely, the sharp decline in the proportion of new corporate speculative-grade issuance to 2.1% and 3.7% in 2008 and 2009, respectively, offers more evidence of the continued aversion of investors to higher-risk issuers.
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