After an unprecedented year of record-breaking debt issuance in response to the global pandemic in 2020, most deal makers across the world’s debt capital markets anticipate a continuation of issuer supply through 2021. Meanwhile, the prospect of continued investor-appetite is seen as an increasingly important factor affecting debt markets.
- Deal makers who responded to the Refinitiv Deal Makers Sentiment Survey expect further growth in global debt issuance widely anticipated.
- The Americas is bullish about the prospects for debt capital markets, but Asian deal makers signal anaemic growth.
- So far, 2021 has seen a strong start for debt capital markets, with Q1 volumes driven by U.S. issuers, in line with predictions.
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The record-breaking levels of debt capital issuances during 2020 are predicted to continue or increase during 2021 by a large majority of deal makers, according to the latest Refinitiv Deal Makers Sentiment Survey.
More than 90 percent of respondents expected sustained or increased DCM activity, with just 8 percent anticipating a retreat. In addition, the average predicted growth rate has climbed to 6.4 percent.
Debt capital market sentiment varies by region
There are marked regional differences in sentiment for the debt markets, with the most optimism in the Americas, becoming increasingly bearish moving eastwards.
The average growth rate predicted in the Americas and EMEA is positive with 45 percent and 38 percent of respondents expecting an increase in global debt deal volume growth respectively. Asia-based deal makers predict an average growth rate of just 3.2 percent.
By type of respondent, investment bankers and in-house corporate deal makers are the most bullish, predicting a growth rate in debt volumes of 8 percent and 7.2 percent respectively. The advisory community is the most cautious, coming in at a conservative growth rate of 4 percent.
Activity during the first three months of 2021 appears to broadly concur with the deal makers’ sentiment. Debt issuance to the end of March was 25 percent up on the previous quarter and flat with the same period last year. It was also the fifth consecutive three-month period to surpass $3 trillion in issuances.
Few expectations of a rise in interest rates
Factors expected to impact the debt markets going forward are consistent across regions and include a spike in concern around the ability to repay loans and refinancing options, risk appetite and investor sentiment, as well as scrutiny around the role of banks and lending regulations.
With interest rates already razor thin, and few expectations of rate rises, this is seen as less likely to impact activity in 2021 than in previous years.
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