Global bond issuance could fall about 9% in 2020 from last year across all sectors due to the COVID-19 pandemic and subsequent economic slowdown.
Bond issuance from financial services companies, specifically, are likely to fall 1% to 5% in 2020 from 2019, according to a report from S&P Global Ratings.
While those financial services companies face similar headwinds as non-financial companies, which S&P expects will contract by 7% to 14%, countermeasures do exist, the report says.
They exist in the forms of central banks lowering interest rates after seeing issuance freeze and borrowing costs quickly rise, as well as the increase in excess reserves held by U.S. banks with the Fed, which "tend to be a leading indicator of bank issuance," according to the report.
"The sizeble upcoming maturity profiles of global financial institutions through 2022 offer support for refinancing needs, particularly in China," the report said. "While central banks may dial back their recent quantitative easing measures toward the end of the year, they will likely retain their now much lower policy interest rates for some time, making debt issuance attractive as the recovery kicks in and expands."
Within structured finance, global bond issuance should decline about 25% from last year, New origination volume within global structure finance should fall about 30% out of Europe and 20% out of the U.S., while regions outside the U.S. and Europe should see a 40% decline in volume from last year.
S&P projects a recovery from this recession to begin likely in the third quarter.
