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Easing central bank policies triggered record corporate bond issuance

UNITED STATES (OBSERVATORY NEWS)

Companies around the world sold a record number of bonds in 2019, taking advantage of the lower cost of borrowing. This has raised new concerns about rising levels of debt, writes the Financial Times

According to Dealogic, over the past year corporate bonds worth a little over $ 2.5 trillion were sold. The indicator significantly exceeds the previous record set in 2017. The

activity of the issue of bonds was promoted by the policy of central banks, which changed the rate and lowered interest rates, which helped to reduce the cost of borrowing for all types of companies.

The U.S. Federal Reserve cut interest rates three times in 2019 – a total of 0.75 percentage points.

In September the European Central Bank (ECB) announced a reduction in the deposit rate and the resumption of the purchase of bonds in order to stimulate the eurozone economy.

The World Bank last week signaled a growing likelihood of a new debt crisis amid maximum debt growth over the past 50 years.

In their report on global economic prospects (GEP), WB analysts noted that four waves of debt accumulation have occurred over the past 50 years. The current wave, which began in 2010, is characterized by the “largest, fastest, and most ambitious growth” of global borrowing since the 1970s.

According to bank analysts, maintaining low interest rates in the medium term mitigates some of the risks associated with high levels of debt. However, the previous three waves of debt buildup have largely ended in financial crises in many developing countries and emerging economies.

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