Global bond issuance tipped to contract 2%

SINGAPORE: Ratings agency S&P expects global bond issuance to contract by around 2% in 2022 as monetary policy tightens.

The fall would break a strong recent trend, with global bond issuance surging 5.6% in 2021 to finish at $9 trillion in 2021 – a surprise increase on the breakthrough growth seen in 2020.

S&P says the pessimistic outline for stems from fears the Federal Reserve could move too quickly, aggressively, or unpredictably in its fight with inflation over the coming months, potentially stymieing growth and earnings and exporting tighter monetary policy abroad.

“This is the key item markets appear to be watching, but our base-case assumption that interest rates will rise this year without becoming restrictive remains intact at this point,” said Nick Kraemer, head of S&P Global Ratings Performance Analytics.

However, S&P also says risks have grown in the past three months, and has listed the following headwinds:

  • High cash balances among larger firms
  • China’s deleveraging policies
  • Difficult comparisons with 2021 totals
  • Geopolitical risks, including several key elections globally