(Repeat for additional subscribers)
May 12 (The following statement was released by the rating agency)
Financials posted more bond volume growth than
industrials in the first quarter, propelling the U.S. corporate bond market
closer to $5 trillion, according to Fitch Ratings. The trend is due to both
improved bank lending activity and favorable borrowing conditions. Until
recently, the U.S. corporate bond market's growth, up 36% since 2009, had been
fueled almost exclusively by non-financial issuance.
The universe of financial bonds expanded 4% to $1.42 trillion in the first
quarter of 2014 while industrial issues grew 2% to $3.43 trillion. Refinancing
continued to represent a healthy portion of newly originated bonds -- about
one-half of the $242 billion sold in the first three months of the year.
However, in terms of net new debt, financials posted more growth than
Financial volume peaked at $1.9 trillion in 2007 and contracted to $1.3 trillion
post crisis. From 2010 through 2012, volume remained range bound at this level.
In 2013, financial issues grew 7% year over year while industrials rose 10%.
The average coupon of investment-grade financial and industrial bonds sold in
the first quarter of 2014 was 3.1% and 3.5%, respectively. At current rates and
with sustained issuance volumes, borrowing costs on the existing stock of
financial and industrial corporate bonds should continue to contract this year.
The average coupon of outstanding financial issues declined to 4.8% at the end
of March from 4.9% at year-end 2013 and 5.1% a year earlier. The average
industrial coupon was similarly down to 5.5% in March versus 5.6% three months
earlier and 5.8% a year ago.
Floating-rate bonds' visibility increased in the first quarter of 2014. The
issues represented 12% of newly originated bonds -- 23% of financial bonds and a
multiyear high of 7% of new industrial bonds. The return of floating-rate bonds
and a modest shift to shorter term debt maturities is a sign of a more balanced
and less risk-averse market.
Downgrades and upgrades combined affected 1.2% of U.S. corporate bond market
volume in the first quarter of 2014. Even across speculative-grade issues,
rating activity on a par basis was fairly stable in the first quarter, with
downgrades affecting 1.9% of bonds and upgrades affecting 1.7%.
For a full view of U.S. corporate bond market rating and issuance trends, please
see "U.S. Corporate Bond Market Monitor" available at www.fitchratings.com.