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Companies continue to take advantage of attractive conditions in the bond market to issue debt, following a record start to the year.
In April, U.S. companies raised $204.6 billion in the investment-grade bond market, the most issued during the month of April since 2020, at the beginning of the pandemic, according to Dealogic. Among the biggest issuers: Meta Platforms, Intel, AT&T and Walmart.
I reached out to Winnie Cisar, global head of strategy at the credit research firm Credit Sights, to get her take on what's driving issuance and possible risks ahead. Here are her responses, edited lightly for clarity.
What's your view on market conditions for corporate issuers?
In April, issuers took advantage of declining volatility, tightening spreads and elevated yields, which drew cash into fixed income and drove strong execution for investment grade issuers. Coupled with earnings that have generally exceeded expectations, issuers have rushed to the primary market to raise cash opportunistically and to fund AI initiatives.
While day-to-day conditions can vary depending on the latest Iran headline and subsequent oil move, most gauges of primary market demand indicate that the new-issue market is firmly skewed in favor of borrowers.
What's your outlook for where borrowing costs are heading from here?
We were surprised to see how strongly spreads rallied in April on news of the U.S.-Iran truce as energy markets are still under pressure from less supply coming from the Strait of Hormuz. With our second quarter outlook at the beginning of April, we revisited our full year forecasts and expect that U.S. Treasury yields are likely to stay a bit more elevated in the near-term than we previously envisioned.
We now think the Fed’s rate cutting cycle will be pushed out a bit as the Fed grapples with inflation in the coming months and labor market weakness in the second half of 2026. Our new probability-weighted forecasts indicate that borrowing costs could rise a bit, by 20 to 40 basis points, if spreads again come under pressure.
What do you think is the biggest risk currently facing U.S. corporate bond market?
We are still concerned about the health of the labor market and consumers’ ability to mitigate higher energy prices and maintain elevated levels of spending. Any sort of tightening of consumer belts could lead to tighter credit conditions, especially if coupled with continued challenges in private credit, which would lead to wider spreads and more volatility.
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