Issuers are taking advantage of strong investor demand to refinance upcoming debt, rolling many maturities into later years.

This refinancing is taking place even as yields remain elevated. Benchmark yields have come down from their peaks during the second quarter but remain above long-term averages. Rates appear to be staying higher for longer as the rate cut cycle in many countries, including the U.S., is getting a later-than-anticipated start. Despite elevated yields, spreads are holding at extremely narrow levels.

The buzz of refinancing activity is reflected in the surge of issuance. Investment-grade bond issuance increased 16% globally year over year in the first half, and speculative-grade bond issuance rose 71%. Leveraged loan volume also rebounded in the first half of 2024, nearly doubling year over year, according to Pitchbook LCD, and reached the highest first-half volume since 2021. More than 75% of U.S. speculative-grade bond issuance and over 60% of leveraged loan issuance was for refinancing.

Meanwhile, pricing and credit spreads showed investors' sustained appetite for credit. Speculative-grade spreads in the U.S. tightened to near 230 basis points (bps) in early May, while investment-grade spreads tightened to less than 100 bps in April. In each case, these spreads approached their tightest levels since the global financial crisis.

With the window open for refinancing, the market has been active, and maturities are rolling into later years. However, uncertainty--stemming from geopolitical risk and potentially increased volatility in the second half brought on by the upcoming U.S election--may be leading some companies to refinance now owing to concerns about how long financing conditions will remain supportive.

We based our analysis on a review of debt instruments rated by S&P Global Ratings and issued by financial and nonfinancial corporate borrowers globally. Debt amounts have been aggregated by issue credit rating, and regional breakouts are aggregated by the parent's country of incorporation.

Maturity Walls Are Pushing Out To 2028

• The amount of rated corporate debt maturing over the next 12 months (from July 1, 2024, through June 30, 2025) is 8.5% higher than it was on Jan. 1 (from Jan. 1, 2024, through Dec. 31, 2024) owing to larger maturities in the first half of 2025.
• 60% of the $2.17 trillion in global financial and nonfinancial corporate debt set to mature over the next 12 months (from July 1, 2024, through June 30, 2025) comes due in the first half of 2025.
• Even though maturities rise in 2025, borrowers are already making progress refinancing these maturities.
• The total amount of debt maturing in 2025 declined by 8% since the beginning of this year, including reductions across both the U.S. and Europe, with robust demand for bonds and loans supporting refinancing.
• The reduction in maturities was more pronounced among lower-rated entities (speculative-grade nonfinancial debt maturing in 2025 saw a much steeper decline of 30%) as financing conditions improved.
• Further out, speculative-grade nonfinancial maturities for 2026 and 2027 were also reduced in the first half of 2024 (by 16% and 8%, respectively).
• By contrast, investment-grade maturities for 2026 and 2027 rose slightly, with financial institutions' recent issuance of medium-term notes contributing to the increase.
• Issuers' refinancing of debt since fourth-quarter 2023 has contributed to a reduction in near-term debt, and has led to an increase in maturities further out, with near $2.8 trillion set to mature in 2028 (including $1.17 trillion in speculative grade).
• While the peak year for speculative-grade maturities has been looming in 2028, this is the first time that 2028 has marked the peak for total maturities (investment- and speculative-grade financial and nonfinancial corporate issuers).

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Speculative-Grade Debt Maturities Are Escalating

• Global rated corporate debt maturities peak in 2028 at $2.8 trillion, both later and higher than the prior peak of $2.76 trillion due in 2026 (see "Q2 2024 Global Refinancing Update: Window Of Opportunity May Be Closing").
• For the remainder of 2024 (July 1 through Dec. 31), global rated corporate maturities (including financial and nonfinancial debt) total $869 billion.
• Financial services account for a higher proportion of maturities that are near term (42% of 2024, 45% of 2025, and 42% of 2026) than those that are further out (38% in 2028), when nonfinancial maturities rise and financial maturities start to subside.
• Annual speculative-grade maturities escalate quickly, to $362 billion in 2025 and $626 billion in 2026, eventually reaching a peak of $1.17 trillion in 2028.
• With these rising maturities, speculative-grade accounts for an increasing share of annual maturities, from 11% in 2024 to 42% in 2028.
• For nonfinancial corporate entities, the speculative-grade share is even higher, increasing from 17% in the second half of 2024 to 57% in 2028.
• Annual maturities of 'B' category nonfinancial corporate debt rise sharply in the next few years, from $122 billion in 2025 to $682 billion in 2028.
• The 'B' category grows as a share of annual speculative-grade maturities from 38% in 2025 to 63% in 2028.
• The nonfinancial sector with the most debt maturing through 2025 is autos, with $205 billion maturing ($18.2 billion of which is speculative grade).
• Meanwhile, the media and entertainment sector has the most speculative-grade debt maturing through 2025, at $65.7 billion, and the health care sector has the most debt rated 'B-' or lower maturing over this period, at $25.1 billion. Since the beginning of this year, both sectors have substantially reduced their debt maturing through 2025.

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Market Pricing Reflects A More Favorable View From Investors

• Market pricing suggests investors are taking a more favorable view of credit, even at the lower end.
• Of the bonds maturing in the next 12 months (through June 30, 2025), those rated in the 'CCC'/'C' category are trading markedly lower (with a median price of 93.5 as of July 1, 2024) than those from higher rating categories, which are all trading above 99.
• While higher-rated issues are trading closer to par, the discount on near-term 'CCC'/'C' bonds is not surprising given the much higher default risk and volatility of these lower-rated issues.
• Since the beginning of the second quarter, trading prices on 'CCC'/'C' bonds have risen (from 91.5 as of April 1, 2024), suggesting that the market appears to taking a somewhat more favorable view of these risky credits.

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Higher Funding Costs Await

Because much of the debt approaching maturity was issued back when rates were lower, issuers refinancing fixed-rate debt (such as bonds and notes) likely face higher yields on their new debt.

• Primary market yields rose slightly in the second quarter for 'BBB' bonds in the U.S. and Europe, and for 'BB' bonds in the U.S.
• By contrast, European 'BB' bonds were an exception--yields dropped by a percentage point, after first-quarter yields had been boosted by 144A private placements (which accounted for a greater share of issues in the first quarter).
• Across U.S. and European 'BBB' and 'BB' rated bonds, the median coupon of bonds maturing this year and next has declined since April 1, 2024--suggesting that issuers have already refinanced some of the more expensive debt they had coming due.
• With the increase in primary market yields and the slight decline in yields on debt maturing in the near term, the step-up in borrowing costs is poised to be slightly higher as companies roll over upcoming maturities.
• In the U.S., 'BBB' bonds that are maturing in the second half of 2024 have a median coupon of 3.4% (and 3.8% for debt maturing in 2025), suggesting that these borrowers could face around a two-percentage-point increase in the cost of funding on the debt that's to be refinanced this year and next, based on recent primary market yields.
• In Europe, 'BBB' and 'BB' issuers are facing a bigger increase in their costs of funding this year and next--around 2.7 percentage points from the median second-quarter 2024 yield of new issue 'BBB' bonds.
• Meanwhile, even though 'BB' entities in the U.S. could face a comparable 2.6 percentage point increase in yields for debt maturing this year, these issuers are looking at a more modest increase in yields (of around 1.4 percentage points) in the following year as the median coupon rises for bonds maturing in 2025.

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Debt Is Rising Steadily

Even though much of recent issuance has been earmarked for refinancing, the total amount of rated debt continued to grow in the first half of 2024.

• Global rated debt stands at $24.0 trillion as of July 1, 2024, a 2% increase since the beginning of the year.
• Both investment- and speculative-grade rated debt levels increased during the first half of 2024, with investment grade up 1.7% (from Jan. 1, 2024) and speculative grade up 3.2%.
• This growth in speculative-grade debt follows a contraction in 2023. The amount of speculative-grade debt is now up by 1.1% year over year (as of July 1, 2024).
• This growth in speculative-grade debt occurred even as rising stars (upgrades to investment grade) accounted for over $60 billion in debt and surpassed the $49 billion in debt from fallen angels (downgrades to speculative grade).
• If exchange rates had remained constant, the increase in the amount of debt in the first half of 2024 would have been about a percentage point higher.

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Appendix: Regional Breakouts

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Data Approach

We based our analysis on a review of debt instruments rated by S&P Global Ratings and issued by financial and nonfinancial corporate borrowers globally. Debt amounts have been aggregated by issue credit rating, and regional breakouts are aggregated by the parent's country of incorporation.

We estimated maturities and potential refunding needs of financial and nonfinancial corporate debt rated by S&P Global Ratings, aggregated by issue credit rating.

For each region, we included the rated debt instruments of all parent companies and their foreign subsidiaries. We counted the debt of all these companies regardless of the currency or market in which the debt was issued. We converted any non-U.S.-dollar-denominated debt to U.S. dollars based on the exchange rates on July 1, 2024.

The issue types covered include loans, revolving credit facilities, bank notes, bonds, debentures, convertible bonds, covered bonds, intermediate notes, medium-term notes, index-linked notes, equipment pass-through certificates, and preferred stock. In the case of revolving credit facilities, the amount usually represents the original facility limit, not necessarily the amount that has been drawn. Debt amounts are tallied as the face value of outstanding rated debt instruments.

We excluded individual issues that are not currently rated at the instrument level, as well as instruments from issuers currently rated 'D' (default) or 'SD' (selective default). We expect the credit market will have already accommodated some of the debt remaining in this year, given normal data-reporting lags.

We aggregated sector-specific data according to the subsector of the issuer. The financial sector is defined as all banks, brokers, insurance companies, asset managers, mortgage companies, and other financial institutions. We aggregated debt issued by financial arms of nonfinancial companies with the sector of the corporate parent. We excluded government-sponsored agencies such as Fannie Mae and Freddie Mac, project finance, and public finance issuers.

In this study, we've aggregated maturity data into the following regions: U.S., Europe, rest of world, and emerging markets. We define those regions as follows:

U.S.:  U.S., American Somoa (U.S.), Bermuda, Cayman Islands, Guam (U.S.), N. Mariana Islands (U.S.), Puerto Rico, and U.S. Virgin Islands.

Europe:  Andorra, Anguilla (U.K.), Austria, Belgium, British Virgin Islands, British Indian Ocean Territory, Channel Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Falkland Islands (U.K.), Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Holy See (Vatican City), Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mayotte (France), Monaco, Montserrat, Netherlands, Netherland Antilles, New Caledonia (France), Norway, Portugal, Reunion (France), San Marino, Sint Maarten (Dutch Part), Slovak Republic, Slovenia, Spain, St. Helena (U.K.), St. Pierre/Miquelon (France), Svalbard/Jan Mayer Islands (Norway), Sweden, Switzerland, U.K., and Wallis/Futuna Islands (France).

Rest of world:  Any country not included in either the U.S. or Europe.

Emerging markets (or EM-18):  Argentina, Brazil, Chile, China, Colombia, Hungary, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Saudi Arabia, South Africa, Thailand, Vietnam, and Turkiye.

Related Research

Global Financing Conditions: Early Issuance Should Support Growth Through Second-Half Slowdown, July 29, 2024