Chart 1

Table 1

S&P Global Ratings Credit Research & Insights expects global bond issuance to fall about 3.5% in 2023 (see chart 1 and table 1).   Every asset class saw declines in the first quarter, in most cases from reduced March totals as bank failures in the U.S. and Europe stoked fears of contagion to the broader banking system. This began with the failure of Silicon Valley Bank (SVB) on March 10, followed by a couple of weeks of heightened market volatility that saw issuance nearly grind to a halt. Since then, authorities have intervened on both sides of the Atlantic and thus far it seems that any perceived contagion risks have been contained.

Because of the largely favorable market reactions since, and with our economists increasing their GDP forecasts for most countries this year, we maintain our expectations that second-half 2023 issuance will rebound from last year's levels. But we have revised down our base case for most sectors from last quarter, given most sectors saw double-digit declines in issuance through the first quarter relative to 2022. While these declines should narrow as 2023 progresses, they represent deep holes that will be difficult to climb out of.

Bank Turmoil Hits First-Quarter Totals, Leaving Deeper Hole To Climb Out Of

Coming into the year, we anticipated heightened market volatility would make bond issuance choppy. This certainly ended up being true, and to a greater extent than we expected. The March 10 failure of SVB sparked concerns about other regional banks in the U.S., and later, Credit Suisse was absorbed by UBS in a process guided by Swiss regulators. Authorities in Europe and even more so in the U.S. stepped in to restore relative calm to overall markets. But smaller regional banks are still being met with caution (see chart 2). For the year-to-date, the S&P Regional Banks Select Industry Index is still down 25%, having fallen dramatically around March 8 when difficulties at SVB began to mount, with little to no recovery since. Meanwhile, the broader S&P 500 is up over 8%. Using equity markets as a broad guide, it appears investors are not necessarily worried about bank vulnerabilities spreading into the rest of the economy or financial landscape.

Chart 2

Fixed income markets also demonstrate higher risk perceptions for banks since early March (see chart 3). Some initial widening of spreads occurred globally, but this was far more muted relative to U.S. banks and brokers, and as of April 14, only Latin America's corporate spreads are higher than at the end of 2022. Despite year-to-date tightening for most, these favorable spread levels have only just been crossed, indicating that fixed income investors remain more cautious relative to equity market pricing after recent bank stress.

Chart 3

More stable interest rates this year should support issuance.   Core inflation may still be "sticky," but headline Consumer Price Index and Producer Price Index readings are falling fairly quickly. This should eventually help core inflation readings decline later this year as well. With this in mind, and considering the potential threat to economic growth from bank sector turbulence, the Federal Reserve currently expects the fed funds rate to reach about 5.1% by year-end, implying another hike of 25 basis points (bps). This would mark a stark change compared to the rapid and continuous hikes of 2022. Interest rate hikes tend to operate with a lag, but the bank turmoil in March served as a reminder via the large unrealized losses seen over the course of 2022 that some things react more quickly (see chart 4).

The pace of rate hikes in 2022 was the fastest ever seen, though some of this is a result of the fed funds rate starting 2022 at effectively zero. If we assume the Fed reaches its 5.1% year-end projection by the next meeting, the pace of interest rate increases on a year-over-year basis will slow roughly as dramatically. This should give markets more confidence in their ability to price new deals, both from a lender and borrower perspective.

Chart 4

Second-half issuance totals have easier comparisons to last year.   We feel second-half 2023 issuance totals will be strong, in part because of fundamental factors such as more stable interest rates, upwardly revised growth expectations, and falling cash balances among corporates. However, technical factors also favor second-half issuance growth this year, such as the relatively weaker than normal second-half totals seen last year, particularly in the fourth quarter (see chart 5). While the fourth quarter is typically the weakest quarter in most years, the relative proportion to 2022 totals was especially weak.

Chart 5

A weaker dollar ahead offers support.   As we report all issuance figures in U.S. dollars, a weaker dollar would also support second-half issuance. Most major currencies gained ground since the start of fourth-quarter 2022 (see chart 6). We expect the dollar surge is over, given major central banks will likely take rates higher than previously expected, but a return to pre-2022 exchange rates may be a little further off. Even so, stabilizing current exchange rates would make for favorable second-half comparables this year relative to last year.

Chart 6

Downside risks remain elevated.   Although recent bank stress seems contained for now, regional banks could still prove vulnerable given they have less oversight in the U.S than larger banks. Any further failures or contagion to other markets such as commercial real estate could dampen market sentiment and lead to more primary market closures similar to the one seen in March. Additionally, other unknowns remain and could converge in the next quarter or so: uncertainties around the U.S. debt ceiling outcome, an estimated $1 trillion in leveraged loans that still need to migrate off of LIBOR by the end of June, and growing fears around Treasury market liquidity. Our current view is that these items will ultimately resolve themselves (or in the case of Treasury market illiquidity, may be overstated). But the paths to resolution may still prove disruptive, particularly if more than one of these raises concern at the same time.

Issuance Projections

We expect nonfinancial issuance to increase about 8.5% in 2023, with the potential for upside.  Global nonfinancial corporate issuance saw only a modest decline in the first-quarter relative to the same period in 2022 (-3.5%). We expected some volatility coming into the year, so starting out with a decline did not disrupt our previous forecast for 8.5% full-year growth. Positive revisions to 2023 economic growth projections by our economists also support stronger issuance for the year, alongside our expectation that policy rates in the U.S. will stabilize soon, restoring stability to primary markets.

Though more stable than in 2022, interest rates will be higher, pushing up the cost of debt for firms, and the European Central Bank (ECB) will likely continue raising rates longer than the Fed. This may weigh on European issuance trends, but on a technical level will likely weaken the U.S. dollar, offering support to European issuance totals, as we convert all issuance to dollars for our reporting. With rising rates, global merger and acquisition (M&A) activity has been falling over the last 15 months. This could pick up as interest rates stabilize, however.

While some firms may have used their excess cash to pay down upcoming debt, this does not appear true for the larger population of rated issuers, globally (see chart 7). Investment-grade firm cash balances have declined substantially in 2022, and we expect them to remain at pre-2020 levels going forward. Firms were arguably able to avoid issuing debt last year amid quickly rising rates, in part due to large cash piles to pull from as an alternative. However, we also expect the build-up in outstanding debt since 2016 to continue. Rather than use funds to pay down debt, companies were more likely to increase buybacks and dividends in 2022--which roughly reached a combined $1.5 trillion for the S&P 500 last year.

Chart 7

Among emerging markets, the country with the most issuance--China--saw a decline of about 19%. Despite this and notable recent stressors, the largest sector (homebuilders/real estate) held relatively steady compared to last year. More broad-based issuance declines were seen in various sectors of the economy. However, some of this decline may be made up as the year goes on if the economy expands, as we expect, as the country shifts its focus from health to growth.

We expect financial services issuance to fall 5% in 2023.  Unsurprisingly, bond issuance by financial services companies contracted significantly in the first quarter (21%), mostly because of a falloff in March following the certain bank failures. Regionally, declines varied significantly, with U.S. financial institutions issuance declining 46% while Europe fell only 3.7%, in part due to particularly strong issuance totals from the region's banks in January. While we expect issuance trends to normalize, this may be some time away, making the first-quarter decline difficult to completely pull out from by year-end.

One feared casualty of the recent bank sector stress is the market for additional Tier 1 capital, or contingent-convertible bonds. These are primarily used in Europe for loss-absorbing purposes. It is estimated to be a $275 billion market, or only about 1.7% of all global financial services issuance outstanding. We do not envision this asset class will disappear as a funding source, but even if it did, we believe the impact on overall financial services issuance would be minimal.

We still expect a rebound from first-quarter totals in 2023, but not an expansion, given fundamental challenges for issuance growth coming into the year. Much of recent years' growth was seen in the brokers sector, which saw a boom in M&A, particularly in 2021. That M&A pipeline has fallen off dramatically, leaving little room for growth and investment (see chart 8). In addition, within the U.S., the overall bank system reached its highest leverage levels since the 2008 financial crisis in 2022 (9.6x). Historically, this tends to precede a falloff in bank issuance, which was at an annual high last year.

Chart 8

Global structured finance issuance could drop even further below our initial 2023 expectations.   After losing momentum in the second half of 2022, global structured finance issuance ended the year at $1.2 trillion in 2022, down 7% compared to 2021. Through the first quarter of 2023, global structured finance issuance tallied a lackluster $300 billion, a 22% decline versus the corresponding period last year. Persistently high inflation, tightening monetary conditions, turbulence in the banking sector, and rising geopolitical tensions continue to disrupt financial markets, and we now expect issuance declines of 20% (with a range of -15% to -25%) relative to last year. Our expectations for stronger but still subdued economic growth in 2023 could limit any strong upside for the remainder of the year. Further, as neither economic recovery nor recession prospects have yet to materialize, pronounced uncertainty will likely continue to subdue issuance in the near term and keep risks tilted to the downside.

The forecast is largely based on the slower pace of U.S. issuance, which typically represents the lion's share of global structured finance issuance volume. Our economists still expect a short and shallow recession in the U.S. this year but have revised up their growth estimates over the last quarter, and preliminary estimates for first-quarter GDP are above 2% (based on the Atlanta Fed's GDP Now projection). This should help second-half 2023 totals to recover some of the year-to-date lost ground. However, increased credit tightening from recent bank sector events may lead to a larger contraction, particularly if further disruptions occur. While our global issuance forecast is negative, we anticipate the 2023 total will land near 2018-2020 levels, but with mixed outcomes across sectors and subsectors.

Chart 9

The U.S. represented 39% of the global structured finance market in the first quarter of 2023, a decline of nearly 12 percentage points from year-end 2022 and 22 percentage points from the previous year. Further, the covered bonds sector--which doesn't exist in the U.S.--continues to lead the increase in issuance in the rest of the world. European covered bond issuance is up 23% year over year through the first quarter. Covered bonds are insulated from the wider issues disrupting markets, and normalizing central bank policy in Europe has brought more issuers to market. Interest rate changes have increased the appeal of covered bonds relative to government debt for some investors, which may continue to support issuance in the space in the near-term.

We expect U.S. public finance issuance to be flat in 2023.  We assume 2023 issuance will be flat compared with 2022, as we believe rising interest rates and low maturing debts will keep demand for municipal issuance modest. We are also watching economic growth, inflation, and Fed policy.

Heightened market volatility and rising interest rates led to a 26% year-over-year decline in U.S. public finance issuance volume. This was the largest decline among asset classes in the first quarter. Each month of the quarter saw a decline relative to last year, so the decline was not limited to the bank sector stress in March.

We expect a slight decline in international public finance (IPF) issuance.  Like most sectors, IPF also saw a double-digit (10%) decline in issuance from last year. That said, the first-quarter total of $270 billion was the second-largest first-quarter total after last year's $301 billion. We believe some of the shortfall so far this year will be made up--ultimately, to a roughly 5% reduction in issuance relative to 2022. Second-half volumes in 2022 were particularly weak, accounting for only 28% of the annual total. However, the record high quarterly total of $463 billion in the second quarter of last year--which beat the previous record by $81 billion--will most likely result in a further decline by mid-year.

Chinese issuers accounted for 81% of the 2022 total. Despite national policies aimed at reducing debt, we expect refinancing needs to keep Chinese issuers' totals healthy this year. And Chinese debt markets are generally limited to domestic lenders, with very little foreign involvement, in effect shielding issuers from rapidly rising rates across the rest of the globe.

First-quarter summary

Global bond issuance in the first quarter totaled $1.97 trillion, down 15.1% from the first quarter of 2022. Declines were seen across all asset classes, with the largest drops from U.S. public finance (down 26.5%), structured finance (down 22.3%), and financial services (down 20.6%). A smaller but still significant decline was seen in IPF (down 10%), while nonfinancial corporates saw a marginal decline of 3.5% as issuance growth in the U.S. hit 19%. These figures cover only debt with maturities greater than one year and exclude debt issued by supranational organizations and sovereigns. All references to investment-grade and speculative-grade debt refer to issues rated by S&P Global Ratings.

U.S. Financing Conditions Remain Mixed After March Turbulence

Already tight at the end of 2022, financing conditions in the U.S. turned even worse in March, and primary market issuance fell off quickly. Yet primary issuance still ended the quarter strong in the U.S. for nonfinancial corporates--rising 19% relative to first-quarter 2022. Bond spreads widened quickly in March, but largely due to falling benchmark yields rather than rising secondary market yields. Despite the challenges, the distressed debt market remains small, with the distress ratio well below typical highs seen during recessionary periods.

Table 2

U.S. speculative-grade bond issuance ground to a halt

First-quarter U.S. speculative-grade issuance was weak across all rating categories. Over half of first-quarter speculative-grade issuance priced in January, and volume sharply fell from mid-February through the end of the quarter. The drop in issuance coincided with a rise in interest rate volatility in February and the banking crisis in March. No issues rated 'B-' or lower priced in March, and the speculative-grade bond primary markets ground to a halt as the quarter ended. Volumes have improved but remained very weak through April 18.

U.S. investment-grade corporate issuance was strong for the first quarter, largely due to a pickup in 'BBB' volumes in February. Issuance for the quarter was strong for both the 'A' and 'BBB' rating categories, which accounted for 48% and 45% of investment-grade volume in the quarter, respectively (see chart 10). Volumes dipped somewhat in March amid the bank crisis and have slowed further in April.

Chart 10

Rated nonfinancial bond issuance was strong in the first quarter at $226.3 billion. Utilities ($51.6 billion), high technology ($38.5 billion), health care ($28.7 billion), consumer products ($24.2 billion), and retail/restaurants ($16 billion) led by volume in the first quarter.

Rated financial bond issuance was weak in the first quarter at $119.8 billion after volume plummeted in February and March.

Table 3

U.S. public finance issuance falls over 25%

U.S. municipal bond issuance in the first quarter of 2023 was $76 billion, up very slightly from $75 billion in the fourth quarter of 2022 and down over 25% from $103 billion in the first quarter of 2022. Issuance in February was below $30 billion for the sixth consecutive month, with March breaking through slightly at $32.3 billion (see chart 11).

Chart 11

By component, new money issuance has been 81% of all issuance in 2023, compared to 79% for all of 2022. Refunding rose in terms of percentages to 16% from 13% last year, while mixed use issuance is 3%, down from 8% last year (see chart 12).

Chart 12

The three largest issues in the first quarter were a $3.5 billion issue by the Texas Natural Gas Securitization Finance Corp. in March to help utilities deal with the ongoing effects of the 2021 winter storm, a $1.8 billon general revenue bond from the Regents of the University of California, and $1.8 billion in general obligation bonds from the State of California.

Table 4

So far in 2023, Texas leads issuance, with $14 billion, up 26.8% compared to the same point last year, followed by California, with $10.6 billion, down 14.6% compared to the same point last year (see table 5).

Table 5

U.S. structured finance issuance fell 38% in first-quarter 2023

U.S. structured finance issuance reached a mere $115 billion through first-quarter 2023, a 38% year-over-year decrease (see chart 13). Rising interest rates and broader market volatility reduced the appetite for longer-duration spread products, continuing the trend exhibited in the second half of 2022.

As rates rise, the cost of debt for issuers increases and investors tend to move toward more liquid markets. Nevertheless, interest rates remain below historical norms and demand still exists for spread products. Higher risk-adjusted yield, coupled with the largely stable performance offered by many structured finance sectors, could remain attractive to some investors.

Chart 13

U.S. structured credit new issuance volume increased nearly 8% through the first quarter of 2023, making it the only sector to grow. However, these figures are compared to a relatively slower start to the year for collateralized loan obligations (CLOs) in 2022 due to price discovery among SOFR-indexed CLO tranches and the underlying leveraged loans. The leveraged-loan market has also fallen behind last year's pace (by roughly 71%), setting the stage for declines in structured credit issuance further into the year. In addition, given aging warehouse facilities and the June 30 LIBOR transition deadline, we expect issuance to slow in the second quarter. Nevertheless, spreads remain considerably wider than they were a year ago. If they narrow and larger players return to the market, new CLO issuance could still be strong compared with pre-pandemic years.

U.S. asset-backed securities (ABS) issuance saw the lowest year-over-year decline in 2023, down about 15% relative to 2022. Historically, ABS has represented the bulk of U.S. structured finance issuance, but its inclusion of more consumer-reliant sectors will likely present risks depending on the depth of the expected recession.

We expect issuance to be mixed across the large number of subsectors in the asset class. Auto ABS exhibited the only year-over-year increase through March, up 2%. Auto loan and lease ABS--which generally lead U.S. ABS issuance at over 40% of total volume in recent years--were poised to be the most affected by the Russia-Ukraine conflict because the region has important raw materials for auto production. While we initially anticipated a slight increase to light vehicle production with China's economic recovery fueling higher demand, S&P Global Ratings now expects vehicle sales momentum to falter in the second half of 2023 due to weaker North American and eurozone economies. More specifically, we anticipate subprime auto ABS issuance to be subdued as these borrowers are more vulnerable to worsening macroeconomic conditions.

U.S. residential mortgage-backed securities (RMBS) issuance was down 63% year over year in the first quarter, substantially lower than we expected. The U.S. housing market is undergoing a correction as rising mortgage financing costs erode affordability and slow the record pace of the home price appreciation since the pandemic. Further, borrowers are disincentivized to leave their homes because many owners have very low mortgage rates. This behavior will further limit the supply and affordability of homes. With recession prospects increasing, we expect both loan originations and the issuance of U.S. RMBS to continue to decline in the near term. However, subsectors such as non-qualified mortgages (non-QM) and home equity lines of credit (HELOC) may continue to see investor support. Non-QM is more insulated than other asset types because the borrowers are less rate-sensitive than in the prime conforming space. Meanwhile, HELOC issuance could see growth as homeowners tap into lasting equity built over the last few years.

Because ABS and RMBS tend to be consumer-oriented, they may be more susceptible to issuance declines tied to unemployment and changes in consumer spending. S&P Global Ratings economists expect unemployment to reach 4.1% by year-end 2023 and peak at 5.1% in 2025, which will in turn soften consumer spending and decrease loan originations. Issuance on longer-duration assets, such as residential mortgages, could experience a larger decrease than that of shorter-duration ABS products, such as autos. Even so, built-in structural protections could otherwise limit rating actions stemming from an increase in delinquencies or defaults (see "Global Structured Finance 2023 Outlook," Jan. 11, 2023).

U.S. issuance of commercial mortgage-backed securities (CMBS) continues to be challenged by the rapid increase in interest rates, wider spreads, and broader uncertainty. The future of office space demand and hybrid working arrangements weighs on the commercial real estate sector and likely on 2023 issuance volumes. While both single-borrower and conduit/fusion segments experienced year-over-year declines, most of the reduction has been from the single-borrower space, whose property type exposures continue to evolve coming out of the pandemic.

Financing Conditions Tighten In Europe

Financing conditions tightened the world over in March. Still, European primary markets saw increased activity in the first quarter, largely on strong January totals. Nearly every rating category saw totals roughly in line with first-quarter 2022, which represents an uptick from any of the prior three quarters. Leveraged loan activity remained minimal amid market turbulence and continually rising rates.

Table 6

European speculative-grade bond primary market shutters

First-quarter European speculative-grade issuance was weak, with total volume falling each month and weak issuance across all speculative-grade rating categories. The speculative-grade primary markets ground to a halt amid the banking crisis in March, with no 'B-' or lower issuance during the month. Through April 18, European speculative-grade volumes have not improved.

European investment-grade corporate issuance was strong for the first quarter-- largely due to strong 'A' and 'BBB' volumes in January before total investment-grade volume tailed off in February and plummeted in March. For the full quarter, the 'AAA', 'A', and 'BBB' rating categories each posted strong issuance, with the 'A' and 'BBB' rating categories accounting for 39% and 40% of first-quarter investment-grade volume respectively (see chart 14). Volumes have modestly improved in April since plummeting in March.

Chart 14

Rated nonfinancial bond issuance was weak in the first quarter at €74.9 billion. Utilities (€22.2 billion), consumer products (€8 billion), telecommunications (€6.7 billion), health care (€6.5 billion), and capital goods (€5.6 billion) led by volume in the first quarter.

Rated financial bond issuance was strong in the first quarter at €204.8 billion, with 52% coming in January before volume slowed in February and March.

Table 7

European structured finance volume was up 11% in first-quarter 2023 on strong covered bond issuance while investor-placed securitization was down over 14%

European structured finance volume grew in the first quarter of 2023 on strong covered bond issuance, but momentum has slowed from 2022. Eurozone covered bond issuance was up 23% versus the corresponding period in 2022, with the main contributors being Spain, Austria, Sweden, and France--all of which had year-over-year growth rates in the sector of 40% or more (see chart 15). Meanwhile, non-covered bond issuance was down 14%.

Two factors supported the growth in covered bond issuance in the first quarter: redemptions of target longer-term refinancing options (TLTRO), the ECB's program to offer longer duration loans at favorable costs, and the expected monetary policy tightening, which led banks to front-load their issuance plans. With reduced funding needs and weakening loan growth, we expect covered bond issuance to fall short of the 2022 peak. The expected quantitative tightening measures will also temper covered bond issuance as the ECB stops its asset purchases (see "Global Covered Bond Insights Q2 2023: The Implications Of Rising Interest Rates," April 12, 2023).

Primary issuance of leveraged loans in Europe declined substantially year over year through the first quarter to levels not seen in over a decade. Decreased originations in the first quarter affected the packaging of European CLOs, which ended the first quarter down 35%. We expect leveraged loan originations to continue to decrease as interest rates rise, inflation remains elevated, and the Russia-Ukraine conflict continues to disrupt the European economy. A slowdown in M&A activity will also continue to drag on leveraged loan and speculative-grade bond sales, further affecting CLO creation.

Eurozone RMBS issuance through the first quarter was down nearly 73% compared to the first quarter of 2022, with rising interest rates exacerbating affordability concerns. While RMBS has historically driven the structured finance market in the U.K., covered bonds remain the bright spot, up 3% year over year. Despite the strong start to the year, reduced funding needs coupled with weak loan growth will likely lead covered bond issuance to slow and fall below 2022 levels.

Chart 15

Financing Conditions Tighten In Emerging Markets While Primary Markets Slow

Similar to other regions, emerging market spreads widened following the failure of SVB in early March but have slightly declined since. Most regions' spreads are still near their highest points for the year but remain below highs seen in the second and third quarters of 2022 (see chart 16). Primary markets took a hit in March as well and saw subdued totals for what is normally one of the stronger quarters of the year.

First-quarter dollar-denominated emerging and frontier market corporate bond issuance fell to just $31.3 billion--the lowest level of first-quarter issuance since 2016. Issuance was weak across all regions in the first quarter. Asia-Pacific (ex-China) led with $13 billion, followed by Latin America and the Caribbean with $7.5 billion, China with $5.5 billion, and Europe, Middle East, and Africa (EMEA) with $5.4 billion.

First-quarter rated emerging and frontier market corporate bond issuance also fell to a seven-year low of just $22.5 billion (see chart 17). Only the 'AAA' and 'AA' rating categories posted strong issuance for the quarter, with $4.8 billion and $5.2 billion, respectively. All regions posted weak first-quarter rated issuance--Latin America and the Caribbean led with $7.8 billion, followed by Asia-Pacific (ex-China) with $7.2 billion, China with $5.2 billion, and EMEA with $2.4 billion.

Chart 16

Most corporate bond issuance in emerging and frontier markets is unrated. In the first quarter, 94% of issuance was unrated by S&P Global Ratings, and 82% of all first-quarter issuance was unrated debt from China.

Chart 17

First-quarter emerging and frontier market corporate bond issuance including unrated issues remained strong but fell to $382.3 billion from $514.3 billion in first-quarter 2022. China was the only region that posted strong issuance for the quarter, with $320.2 billion (see chart 18).

Chart 18

Table 8

Table 9

International public finance issuance declined over 10% in the first quarter

Through the first quarter, IPF issuance declined just over 10% relative to first-quarter 2022. This sector, like many, saw a marked decline in March--down roughly 32% compared to March 2022. China accounted for nearly 79% of the quarterly total, making it the main driver of global bond issuance for this sector. Since China's markets are largely limited to domestic investors, they were largely insulated from interest-rate hikes in the rest of the world. That said, local governments are piling on debt and will likely need to cut back or stabilize their debt loads. For the first quarter, Chinese IPF issuance was down 3.2%.

Outside of China, issuance was up 4.4%, with many countries showing increases over 2022. Germany, Canada, Japan, and Australia led the non-Chinese total, accounting for 84.4%, or $52.8 billion.

Data on non-U.S. public finance volume is not reliable for determining the true size of overall borrowing, but these numbers can point to major trends. In the four years prior to 2020, issuance was extremely high (over $630 billion each year, on average); in 2020, issuance exceeded the $1 trillion mark for the first time, only to break $1.2 trillion in 2021. For 2022, the total was still in excess of $1 trillion, but this level could be challenged in 2023.

Structured finance issuance growth outside of the U.S. and Europe fell 31% in first-quarter 2023

Structured finance issuance outside of the U.S. and Europe decreased 31% year over year in the first quarter. Issuance declined across the board, except for Canadian credit card ABS, which doubled. The higher Canadian credit card ABS issuance continues the trend observed in recent years, which we attribute to the all-in cost-of-funds advantage, coupled with strong ratings performance in the sector.

While we initially anticipated a slight increase in issuance from China given expected economic growth as pandemic-related lockdown measures were lifted, the pace of issuance has also fallen in China and is down about 56% year over year. Still, the expected recovery of economic growth in China could lead to a pickup in issuance the near term. Dominant sectors such as RMBS and ABS are most likely to lift issuance, as the property sector continues to develop and as the impact of COVID-19 on vehicle sales fades. That said, the pace of such a recovery is still uncertain.

Australian structured finance issuance was down 32% year over year through March 31, 2023. With Australian issuance driven primarily by the RMBS sector and increasing ABS issuance more recently, we expect Australian structured finance issuance to be further challenged given the prospect of an economic downturn, while higher for longer interest rates would increase household debt levels and consequently the packaging of these two consumer-reliant sectors.

Related Research

• Global Credit Conditions Q2 2023: Balancing Resilience And Turbulence, March 30, 2023
• Economic Outlook U.K. Q2 2023: Growth Eludes This Year Even As Inflation Eases, March 27, 2023
• Economic Outlook Eurozone Q2 2023: Rate Rises Weigh On Return To Growth, March 27, 2023
• Economic Outlook U.S. Q2 2023: Still Resilient, Downside Risks Rise, March 27, 2023
• Economic Outlook Emerging Markets Q2 2023: Global Crosscurrents Make For A Bumpy Deceleration, March 27, 2023
• Economic Outlook Asia-Pacific Q2 2023: China Rebound Supports Growth, March 26, 2023