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Abu Dhabi, UAESunday 17 February 2019

Global bond issuances to fall in 2019 on market volatility, says S&P

Total issuances set to decline by 0.6 per cent from $5.8bn last year

Total global bond issuances are expected to decline by 0.6 per cent year on year, says S&P Global Ratings, as the dollar stays flat. Reuters
Total global bond issuances are expected to decline by 0.6 per cent year on year, says S&P Global Ratings, as the dollar stays flat. Reuters

The value of global bond issuances is expected to decline marginally by 0.6 per cent year-on-year in 2019, due to increased market volatility and higher interest rates in the US and Europe, a report from S&P Global Ratings said.

“Financing conditions tightened in the US and Europe during the fourth quarter [of 2018], largely as a result of an abrupt increase in financial market volatility, leading to a complete lack of speculative grade bond issuance in both regions in December,” S&P said.

Corporate spreads then widened considerably in the last weeks of the year and although they have declined since, “we believe tighter financial conditions are here to stay”, the agency’s latest credit trends report on Sunday said.

Total global bond issuance stood at around $5.8 billion in 2018, down 6 per cent from $6.2bn the previous year, according to S&P.

Many of the macroeconomic risks that arose in 2018 – including trade uncertainty, slowing global economic growth and geopolitical tensions – are set to continue into 2019, S&P added. Nearly all could have a “deleterious” effect on bond issuance, squeezing total volumes again this year, the report said.

The International Monetary Fund downgraded its global growth forecasts for 2019 on rising trade tensions and protectionism. The lender now projects global gross domestic product to grow by 4.5 per cent in 2019, down from 4.6 per cent in 2018, and 0.2 per cent lower than its forecasts made in October.

“Economic growth projections continue to be revised slowly downward, the US-China trade dispute has been put on a temporary hold, the yield curve in the US continues to flatten and there are two months to go until [the UK’s exit from the European Union is triggered], with no settled Brexit agreement in sight,” S&P’s report said.

Currency fluctuations are another factor to consider this year. Some appreciation in the US dollar is expected in 2019, S&P said, but less than in 2018 and limited to certain regions.

Meanwhile, major European currencies are expected to remain stable against the dollar over the course of the year, while most emerging market currencies are set to depreciate.

Updated: February 3, 2019 12:50 PM

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