Fitch: Race against interest rates brings U.S. corp bond issuance to near-record levels

U.S. non-financial corporate bond issuance totaled $656 billion in 2014, falling shy of the record $686 billion issuance in 2012, according to Fitch Ratings. After three years of robust U.S. corporate bond issuance, averaging more than $650 billion per year, issuance in 2014 was bolstered by the healthcare and pharmaceutical sector, which saw a 7% year-over-year increase in volume.

'The race against higher interest rates is on as corporations take advantage of favorable borrowing conditions,' says Eric Rosenthal, Senior Director in the U.S. corporates team. '2015 is poised to be another strong year, with the surge of issuance in the fourth quarter 2014 (4Q'14) already spilling over.'

Issuance through end-February 2015 rang in at $115.7 billion, a 30% increase from the same period a year earlier. Issuance in 4Q'14 totaled $187.9 billion, the highest since 4Q'12.

The U.S. corporate bond universe finished 2014 at a high of $3.7 trillion, up 8% from the prior year. More than 50% of the current universe is accounted for in deals issued in the past three years. Funding costs continue to fall with the par-weighted average coupon of outstanding corporate bonds closing 2014 at 5.3%, and dropping again to 5.2% at end-February 2015.

Despite strong issuance from the healthcare and pharmaceutical sector, the energy, utilities and infrastructure sector remains a sizable portion of the U.S. corporate bond market, accounting for 23% of 2014 issuance and 25% of total outstandings. Notably, new volume in the telecom, media and technology space fell 24% year-over-year.