The world is once again in love with bonds — perhaps like never before. The current issuance rate is not only outpacing every year since the financial crisis but is besting the all-time high year.
In 2006, banks underwrote a record $6.6 trillion USD in debt to repurchase for sale. So far in 2016, the industry is 9% ahead of where it was at this time in that historic year, according to according to a report by the Financial Times.
If that holds, by the time December 31 hits, we will see the most bonds every sold in one calendar year.
“The sales have been propelled by central bank stimulus as policymakers seek to jump-start economic activity, including negative interest rate policies and outright bond-buying programs underway by the Bank of Japan and the European Central Bank,” wrote Eric Platt, the Financial Times’ U.S. capital markets correspondent.
His findings were backed up by several analysts. Among them are Rick Rieder of BlackRock and James Shepard, co-head of investment grade debt capital markets at Mizuho.
“This market has been engineered by central bank quantitative easing,” Shepard told the publication. “That is the root cause of this demand for dollars. The only place to get a stable return at an incremental spread is the credit markets.”