Global bond issuance set to contract 16% in 2022, S&P says

Total issuances in H1 stood at $4.2 tn, down 11%
Global bond issuance set to contract 16% in 2022, S&P says
A trader working at the opening bell at the New York Stock Exchange

Global bond issuances are set to contract by 16 percent in 2022 after a weak first half characterized by market volatility and rising interest rates, an S&P Global Ratings report has said.

The 16 percent decline is a downward revision from S&P’s prior forecast of 5 percent in light of rapid developments. 

The heightened volatility and rate increases began in the first quarter and continued throughout the first six months of the year as inflation stress was compounded by the growing risk of recession, S&P said.

“These growing headwinds have all contributed to slowdowns and contraction in second-quarter bond issuance for every sector, relative to the first quarter, which will keep global bond issuance in 2022 well below last year’s level,” the report said.

“While there was the possibility that borrowing costs could stabilize in the near term and primary markets would resume normal activity, persistently rising inflation has prompted markets to price in more interest rate increases by most central banks,” S&P said.

Recession fears are rising around the globe amid the coronavirus pandemic, the Ukraine conflict, and the central bank moves to tighten monetary policies.

“At this point, there appears to be little to no possibility for positive surprises in the near term for the global economy or financial markets.”

However, declines come for most sectors against two years’ worth of unusually high issuance totals, supported by extraordinary fiscal and monetary stimulus, S&P said.

Non-financial corporate issuances for the year are expected to decline about 30 percent, while issuances by financial services companies will decline by 10 percent, the report said.

It also said global structured finance issuance could drop 12 percent by the end of 2022 while US public finance issuance could decline by about 14 percent.

International public finance issuances are forecast to remain flat for the year.

Global bond issuance in the first half stood at $4.2 trillion, down by about 11 percent from the first half of 2021, according to the report.

The largest declines were in non-financial companies (down 33 percent) while US public finance issuances dropped 14.5 percent during the period.