Mega Deals, Pre-Election Push, Has Street Reassessing Issuance Expectations for 2024

Strong Issuance Activity in 2023

Entering 2023, syndicate desks and investors anticipated a robust issuance calendar given a favorable interest rate environment, strong corporate balance sheets and a healthy M&A pipeline. Year-to-date issuance has not disappointed, with over $1.5 trillion of investment grade issuance through September, up from $1.3 trillion during the same period last year. Similarly, high yield issuance of $440 billion is on par with 2022’s record-setting pace.

Several factors have contributed to this strong issuance activity including:

• Issuers locking in lower borrowing costs before rates rise further
• Companies seeking to raise capital for M&A activity and other strategic initiatives amid favorable equity markets
• Refinancing of higher-cost debt issued in prior years

2024 Issuance Outlook

While the 2023 issuance calendar remains robust, the Street is beginning to reassess its expectations for 2024. Several factors are contributing to this shift in outlook, including:

• The impact of higher interest rates on corporate profitability and access to capital
• Potential economic slowdown and recessionary risks
• Heightened geopolitical uncertainty and its impact on global markets
• Presidential election uncertainty and potential changes to tax and regulatory policies

Pre-Election Push

With the 2024 presidential election approaching, companies may seek to issue debt before the outcome of the election is known. This is due to the potential for changes in tax and regulatory policies that could impact the cost of borrowing.

Additionally, companies may be looking to take advantage of the current favorable issuance environment before rates rise further or the economy slows down.

Refinancing Activity

Refinancing activity is expected to remain robust in 2024 as companies seek to take advantage of lower interest rates to reduce their borrowing costs. This will be particularly true for companies that issued debt at higher rates in prior years.

Impact on Investors

The reassessment of issuance expectations for 2024 has implications for investors. With potential for lower issuance volumes, investors may have fewer opportunities to invest in new bond offerings. This could lead to increased competition for new issues and potentially higher yields on new bonds.

Conclusion

The strong issuance activity in 2023 is expected to continue for the remainder of the year. However, the Street is reassessing its expectations for 2024 in light of several factors including higher interest rates, potential economic slowdown, and upcoming presidential election. Companies may seek to issue debt before the election to lock in lower rates and take advantage of the favorable issuance environment. Investors should be aware of the potential for lower issuance volumes and increased competition for new issues in 2024.