This is despite new issuance in European IG credit running nearly two thirds higher compared to 2022. Meanwhile, corporate borrowers issued $606 billion worth of dollar bonds in the first quarter of 2024, the highest total since at least 19902. Companies are looking to take advantage of easier financial conditions, and amid fears that inflation could yet prove stickier, making it potentially more expensive to refinance later in the year. Potential volatility around the time of the US elections also creates uncertainty about conditions later in the year.
Despite frenzied new issue activity in recent times, US corporate bond market liquidity (as measured by primary dealer inventory) has not kept pace with the growth of the market. This may prove problematic if the market’s demand for credit were to fall.
We believe NIP are a key area where active managers can add value versus their passive counterparts. Active managers are well placed to participate in many new deals. Furthermore, a rigorous credit research team are able to identify where new issuance offers an attractive premium.