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Global corporate debt sales rose to a record $8 trillion this year, as companies took advantage of intense demand from investors to accelerate their borrowing plans.

Issuance of corporate bonds and leveraged loans rose by more than a third from 2023 to $7.93 trillion, according to LSEG data, as major companies from AbbVie to Home Depot benefited from borrowing costs falling to their lowest level in decades compared to government debt.

The increase in activity exceeded its previous peak in 2021, as strong investor demand reduced costs for corporate borrowers even before the Federal Reserve and other central banks began cutting interest rates from multi-decade highs.

“Markets are running at full capacity, and then some,” said John McCauley, head of North American capital markets at Citigroup.

These cheap funding costs – at least compared to safe government bonds – initially convinced companies to do so, bankers say Pull forward It was issued to avoid any market disruptions around the US elections. But when spreads narrowed further in the wake of Trump’s landslide victory, some decided to secure their borrowing needs for next year as well.

“Initially it was just a matter of, ‘Let’s de-risk our funding for this year,’” said Tammy Serpe, co-head of fixed-income capital markets at Morgan Stanley. “Then it was, ‘The conditions actually look very attractive, so why not We’re moving forward by 2025 too?”

Pharmaceutical giant AbbVie raised $15 billion from the sale of investment-grade bonds in February to help fund its acquisitions of ImmunoGen and Cerevel Therapeutics, while other big issuers in 2024 included Cisco Systems, pharmaceutical group Bristol Myers Squibb, beleaguered aerospace giant Boeing and retailer Home Depot. .

The average spread on US investment-grade bonds contracted to at least 0.77 percentage points following the election, the narrowest gap since the late 1990s, according to Bank of America data. It has since expanded only slightly. Spreads on riskier high-yield corporate bonds have widened further since mid-November, but also remain not far from 17-year lows.

Despite the tight spreads, total borrowing costs remain high due to the level of Treasury yields, with yields on investment-grade corporate debt reaching 5.4 percent, compared to 2.4 percent three years ago, according to Bank of America data.

These relatively high yields on corporate debt have attracted significant inflows, with investors pumping nearly $170 billion into global corporate bond funds in 2024, according to EPFR data, the most ever.

This has been the bank’s busiest year for high-quality dollar borrowing except for 2020, when Covid stimulus sparked an issuance frenzy, said Dan Meade, head of the investment-grade syndicate at Bank of America.

“We make an estimate for each month about what we expect from supply…and each month it exceeds the actual supply [them]He added.

Even after a boom in issuance in 2024, many bankers said they expect a steady stream of borrowing next year, as companies refinance the wave of cheap debt they took on during the pandemic.

Mark Benieris, global co-head of investment grade finance at JP Morgan, expects activity to “remain flat” next year. But he also highlighted the “wild card” of “the potential for larger and broader debt financing.” [mergers and acquisitions]”.

However, some bankers have warned that the corporate borrowing frenzy could slow if spreads widen significantly from current levels.

“The market is pricing in almost no downside risk right now,” added Maureen O’Connor, global head of Wells Fargo’s high-quality debt group. “With spreads priced perfectly, you see a rise in idiosyncratic risk.”