Corporate America’s Borrowing Boom May Be Slowing

December 10, 2020

Fueled by rock-bottom interest rates and the Federal Reserve’s purchases of corporate bonds as part of its pandemic response, corporate America has been on a borrowing binge. However, Wall Street is expecting a steep decline in corporate bond sales in the coming year.

Corporations with investment-grade credit ratings are expected to issue just $1.1 trillion in new bonds in 2021, a 32% drop from this year, according to a Wall Street Journal breakdown of research from Barclay’s. An analysis from Bank of America shows the decline will be even more pronounced when debt repayments are accounted for. The net new issuance of corporate bonds is expected to be just $63 billion next year, the lowest since 2002.

The Wall Street Journal notes that the decline in borrowing could be read as a sign of confidence from corporate executives who no longer feel the need to buffer their balance sheets.

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