Bond sales by companies worldwide slowed to an 11-year low in January as investors shunned risk amid a meltdown in capital and commodities markets.
About $329 billion (€303.3bn) of debt has been issued so far this month, the least for a January since 2005, when $299bn of securities were sold.
That’s despite the biggest day ever for bond sales in the US on January 13 when Anheuser-Busch InBev sold $46bn of bonds to fund its takeover of SABMiller.
The deal was the second-largest dollar-denominated debt deal on record.
“It’s like the Emperor has no clothes — the world is not as rich as it thought it was,” said Eden Riche, the London-based global head of high-yield and emerging-markets syndicate at ING Bank.
“There are a number of factors coming together all at once — deflating global asset bubbles, the collapse in the commodity market, China slowdown, and concerns the Federal Reserve will raise rates too quickly. It’s created the perfect storm,” the analysts said.
Since the Fed raised rates last month, a rout in Chinese equities has fuelled concern a slowdown there would spread to the global economy.
The Standard & Poor’s 500 stock index has since plunged 6.8%, oil prices have declined 20% over the same period and junk bonds have lost about 1.8%.
January is on track for the slowest month for initial public offerings on US exchanges since December 2008, when no companies filed to raise shares after the bankruptcy of Lehman Brothers Holdings.
Corporate note issuance in China may grow at a slower pace this year, as the world’s second-largest economy expands at the weakest pace in a quarter century, according to Tang Lingyun, deputy head of global markets at Industrial & Commercial Bank of China.
Firms in industries with excess capacity will face difficulty in raising debt financing as investors shun lower-rated securities, he said.
Bond investors who gobbled up $29 trillion of corporate debt since the financial crisis have mostly avoided all but the highest-quality issuers.
AB InBev received a record $110bn of investor orders on its offering, allowing it to tighten yields from initial guidance enough to shave about $100 million in potential annual interest costs.
The outlook for high-yield debt is particularly bleak.
Jeffrey Gundlach, chief investment officer of Double Line Capital, who has warned of a recession in the US, has said issuance of the riskier debt will probably collapse amid rising yields and a slowing economy.
“Corporate bond spreads have moved wider in response to increasing global risk,” said Scott Kimball, a Miami-based senior portfolio manager at Taplin Canida & Habacht, part of BMO Global Asset Management, which oversees $237bn of assets.
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