Goldman’s Jonny Fine Sees Bond Issuance Rush Extending
Oct 24, 2024
auto_awesome
Jonny Fine, the Global Head of Investment Grade Debt at Goldman Sachs, discusses the anticipated surge in high-grade US corporate bond issuance in 2025, fueled by economic growth and refinancing needs. He elaborates on the role of private credit and its impact on traditional financing, as well as the expected dynamics from regulatory changes. Fine and his co-hosts explore how infrastructure finance and increasing M&A activity will contribute to market momentum, alongside the influence of rising interest rates on consumer behavior and capital markets.
Goldman Sachs predicts a significant rise in high-grade US corporate bond issuance in 2025, primarily driven by refinancing and infrastructure financing.
The podcast emphasizes the impact of falling interest rates on investor appetite for high-yield investment-grade corporate bonds amid a positive economic outlook.
As M&A activity resumes, a robust demand for financing in the investment-grade market highlights the evolving dynamics of corporate borrowing strategies.
Deep dives
Instagram's New Teen Account Protections
Instagram has introduced new account features aimed at enhancing the safety of teen users. These changes include automatic protections that restrict who can contact teens and govern the types of content accessible to them. Additionally, users under the age of 16 are now required to obtain parental approval to alter safety settings, ensuring that guardians have a role in monitoring online interactions. The platform aims to create a secure social environment where teens can engage meaningfully with their peers and interests while being protected from potential online dangers.
Record Borrowing and Demand Trends
There has been an unprecedented surge in borrowing activity among various sectors, leading to record levels of issuance in municipal bonds, leveraged finance, and investment-grade debt. This trend is attributed to corporations refinancing existing debts and the increasing appetite for private and direct lending. With the Federal Reserve lowering interest rates, investors are drawn to the high yields currently available in the investment-grade corporate bond market, which are close to 5%. Despite tight spreads, the strong demand for bonds signals a robust economic outlook, encouraging issuers to take advantage of favorable conditions.
Market Dynamics and Pre-Election Financing Rush
The podcast discusses the reasons behind the rush in bond issuance in anticipation of significant upcoming elections. Issuers are motivated to finance early to mitigate risks associated with potential volatility in the capital markets that elections can introduce. Additionally, the inversion of the yield curve offers favorable conditions for corporations looking to finance long-term debt. As many corporations aim to de-risk their financing strategies, borrowing early is seen as a proactive measure to secure funds before the possibility of increased market instability.
M&A Activity and Its Impact on Financing
Mergers and acquisitions are resuming, fueling demand for financing, particularly in the investment-grade market. The podcast notes that while there has been an increase in M&A activity, particularly in private equity, publicly reported M&A remains stable, showcasing reliable issuance trends. A robust backlog of M&A opportunities is anticipated, with substantial financing needs in various sectors including energy and utilities. This resurgence in deal-making is expected to contribute meaningfully to the overall financing landscape in the coming years.
The Role of Private Credit in Today's Market
The discussion highlights the growing presence of private credit and its interactions with traditional capital markets. Private credit serves as a complementary source of funding, particularly for companies that may not fit into the traditional investment-grade framework. The liquidity offered by bridge financing and the influx of capital from private credit lend a level of flexibility that can buffer against market volatility. As investment-grade corporations explore diverse financing options, the collaboration between traditional banks and private credit firms is likely to continue strengthening.
High-grade US corporate bond issuance will rise again in 2025, building on this year’s record-setting pace, according to Goldman Sachs. “There’s a lot of growth in the economy that needs to take place, as well as all of the refi,” Jonny Fine, Goldman’s global head of investment grade debt tells Bloomberg News’ James Crombie and and Bloomberg Intelligence’s Arnold Kakuda in the latest Credit Edge podcast. Refinancing will account for the bulk of the sales, while infrastructure finance and buyouts will boost volume as the economy expands. Fine and Kakuda also discuss the rise of private credit, how regulation and Basel endgame will affect bond markets and the differences between bank financing in the US and Europe, including Additional Tier 1 bonds.
