Magazine article Global Finance

After Record Year of Issuance, the Pace Is Likely to Slow

Magazine article Global Finance

After Record Year of Issuance, the Pace Is Likely to Slow

Article excerpt

Corporations rushed to take advantage of low interest rates in 2001, issuing a record $708 billion of investment-grade bonds in the US market, but the pace of borrowing is expected to slow this year as the economy recovers and borrowing needs recede.

Corporate investmentgrade issuance is forecast to drop 36% to $450 billion in 2002, according to a survey of 23 member firms of the NewYork-based Bond Market Association.

Capital spending by US corporations is expected to be well below 2001 levels, the association says.

For bonds below investment grade, however, new issuance could continue to rise, as the downward trend in credit quality begins to reverse in 2002, market participants say.

Convertible bond issuance is projected to increase to $92 billion in 2002, up from a record $84 billion in 2001. New issue activity is likely to remain strong in this sector, as companies continue to seek the savings that arise from the lower cost of financing provided by convertibles, the BMA survey found.

Despite a slowdown in the third quarter, 2001 was also a record year for international bond issuance, with a total of $1.68 trillion issued, including government debt placed by international syndicates, according to London-based Dealogic.

Among emerging market economies,Argentine issuers ended the year with the most international bonds outstanding, a total of $57 billion, followed by Brazilian issuers, with $46 billion, based on Dealogic's final year-end figures.

Ford Motor was the largest corporate issuer in the international bond market last year, raising a total of $37 billion. …

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