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Credit Trends: Global Financing Conditions: Bond Issuance Is Set To Expand Modestly In 2023, With Stronger Upside Potential


Global Economic Outlook Q2 2023: Real Resilience Meets Financial Fragility


This Month In Credit: 2023 Data Companion


Default, Transition, and Recovery: 2022 Annual Japanese Structured Finance Default And Rating Transition Study


Default, Transition, and Recovery: 2022 Annual Japanese Corporate And Public Finance Default And Rating Transition Study

Credit Trends: Global Financing Conditions: Bond Issuance Is Set To Expand Modestly In 2023, With Stronger Upside Potential

Chart 1


Table 1

Global Issuance Summary And Forecast (Bil. $)
Nonfinancials* Financial services Structured finance§ U.S. public finance International public finance Annual total
2014 2,084.4 2,022.5 905.3 334.0 336.5 5,682.7
2015 2,029.8 1,758.6 905.0 398.0 443.8 5,535.2
2016 2,277.6 1,942.8 822.6 445.0 737.6 6,225.6
2017 2,293.4 2,113.4 916.1 443.0 539.0 6,304.9
2018 2,046.6 2,011.2 1,027.6 343.0 476.9 5,905.3
2019 2,470.8 2,252.8 1,058.5 423.0 767.2 6,972.4
2020 3,375.3 2,669.4 837.1 481.0 1,128.2 8,491.0
2021 3,009.3 3,127.6 1,300.0 477.0 1,199.0 9,112.9
2022 1,968.3 2,666.1 1,206.9 382.0 1,062.4 7,285.7
2023 full-year forecast (year-over-year % change) 8.5 3.0 (7.0) 5.0 0.0 2.5
2023 ranges (%) -5 to 20 -5 to 12 -12 to 0 -3 to 10 -7 to 7 -6.4 to 11.3
Data through Dec. 31. *Includes infrastructure. §Structured finance excludes transactions that were fully retained by the originator, domestically rated Chinese issuance, and CLO resets and refinancings. Sources: Refinitiv, Green Street Advisors, and S&P Global Ratings Credit Research & Insights.

S&P Global Ratings Credit Research & Insights expects global bond issuance to rise about 2.5% in 2023 (see chart 1 and table 1).   Every asset class saw declines in issuance last year--in some cases, by substantial amounts--and so issuance should be primed to increase in 2023, assuming "normal" circumstances. But economic behavior and financial markets have not been normal since the COVID-19 pandemic began. We believe interest rates will stabilize in 2023 and possibly decline later in the year, which should help support both supply and demand for new debt. Recent economic data--especially inflation data--has once again prompted a loosening of financing conditions and more optimistic market expectations.

Our economists have recently lowered their GDP forecasts, which would normally keep issuance lower. That said, fourth-quarter GDP growth in the U.S. has come in at 2.9% on an annualized basis, showing unexpected resilience. This does not mean the U.S. will avoid recession, but when combined with six months of falling inflation, it has led some to believe a "soft landing" may be attainable. With less sense than usual for a clear path forward, we maintain relatively wide ranges around our baseline projections. But with the rising likelihood of interest rate stability ahead, we are generally weighing more on the upside potential relative to three months ago.

Whether recessions ultimately occur or not, they are in our base-case assumptions for the first half of this year. Our second-half assumptions for most economies are more optimistic. As a result, issuance levels could be volatile in the first half of 2023 but stabilize later in the year, particularly as it seems the most substantial interest-rate increases are already in the rear-view mirror. More stable borrowing costs will likely spur a return in demand for new debt, but overall, demand may still be subdued, since many issuers built up their buffers during the pandemic while engaging in heavy amounts of refinancing on favorable terms.

Inflation Cools And Economies Remain Resilient, Prompting Some Optimism

Last year saw a fast pace of interest rate hikes globally, contributing to one of the largest annual declines in aggregate bond issuance in many years. However, 2023 is starting off with much more optimism for fixed-income markets. In recent weeks, positive news on inflation and early indications of economic resilience have led to falling global yields (see chart 2). While there's room for optimism, the landscape remains complicated in the wake of the pandemic and as the Russia-Ukraine conflict drags on. Thus far, the strongest signs of optimism in fixed-income markets appear to be showing up within sovereign debt, which we do not include in this report.

Chart 2


The important question facing markets right now has to do with the trajectory of interest rates. Central banks have been steadfast in communicating their position that further rate hikes are needed, and that should keep interest rates elevated even beyond 2023. Conversely, markets appear to be once again considering a lower terminal rate for interest rates, with rates possibly decreasing in the latter part of this year. Long-term interest rates around the world fell in mid-2022 on assumptions about a potential pivot by central banks, only to resume their prior increases after hawkish comments from the Federal Reserve in August.

But the one-year swap rate was a notable exception: It did not move lower on pivot speculation last June. In the past, it has led moves in the federal funds rate, and it fell from November to December (see chart 3). Similar market gauges such as the CME FedWatch Tool also indicate that markets are anticipating interest rates peaking by midyear.

Chart 3


Notable declines in headline inflation globally are more in line with optimists' views on the economy (see chart 4). Whether it's measured through consumer or producer prices, inflation in the U.S. and Europe has broadly declined for six months in a row. This is a good start in the march to 2% inflation targets, but there's still a long way to go, and some potential headwinds are lurking: any disruption to European energy supplies, continued fiscal spending, and the impact of China's reopening. Inflation could continue to decline at the pace we've been seeing since mid-2022, or it could slow, which could encourage central banks to keep rates elevated but also risk recessions.

Chart 4


Financing conditions remain loose in real terms, which would argue against a central-bank pivot later this year. Despite some of the highest inflation rates in decades, borrowing costs for corporations in the U.S. and Europe remain low (see charts 5 and 6). Real yields--that is, the nominal secondary-market bond yields minus the headline consumer-inflation rates--remain either deeply negative or well off pre-pandemic lows. This implies something has to give for financing conditions to normalize: Either inflation subsides more quickly or interest rates rise further. We don't attribute our assessment of overall financing conditions to just one measure. However, corporate credit spreads are notably tight, as well.

Chart 5


Chart 6


There are signs that the price of labor in the U.S., outside of the headline wage growth figures, is also persistently high. The latest available data (through third-quarter 2022) on productivity and unit labor costs points to an increasingly expensive workforce (see chart 7). In fact, both of these measures are at extreme levels not seen since 1981. Movements like this have tended to lead to recessions, which is consistent with our economists' projections for this year but may also add support for further policy rate increases ahead.

Chart 7


Finally, given that we report all issuance figures in U.S. dollars, a weaker dollar should help lift issuance this year. Most major currencies gained during the fourth quarter of 2022, bringing relative exchange rates back to midyear levels (see chart 8). We expect that the dollar surge is over, but pre-2022 exchange rates may be a little further off. Even so, a stabilization in exchange rates would make for favorable second-half comparables this year, relative to last year.

Chart 8


The sizable declines in issuance in 2022 provide easy comparables for 2023 growth rates to exceed, even if bond issuance totals still fall below recent years' averages. Given very recent trends, we have raised our issuance forecast for the optimistic scenarios to account for scenarios where interest-rate increases lessen this year. Our base case does consider a short and shallow U.S. recession, which could prevent stronger growth in issuance, and other considerations--such as China's reopening and the U.S. debt ceiling--could hamper or help market sentiment depending on the outcomes.

Issuance Projections

We expect nonfinancial issuance to increase about 8.5% in 2023, with the potential for upside.  Global nonfinancial corporate issuance fell 35% in 2022, setting the sector up well for an increase in issuance this year even with a complicated backdrop. Working against a sizable increase are our economists' projections for flat-to-negative economic growth this year in developed markets. The M&A (mergers and acquisitions) pipeline was also historically weak in 2022, and we are expecting capital expenditures to stay somewhat subdued.

In an optimistic scenario--with a stronger increase in issuance--an economic soft landing and lower inflation would lead to stable interest rates and more of a willingness from lenders to return to primary bond markets. Labor market signals in the U.S. are mixed recently, indicating that the market is bending but not breaking. Fourth-quarter 2022 GDP is on track to grow more than 3.5% on an annualized basis, according to the Atlanta Fed's GDPNow model. All of this puts the U.S. in a better position to achieve a soft landing, which should spur on issuers and investors alike.

Through 2020 and 2021, companies built massive cash holdings through unprecedented issuance totals. This gave them wiggle room to avoid having to issue as much debt as usual in 2022 while rates rose. But we expect that these cash stockpiles from rated corporate entities will shrink (see chart 9). This should support issuance in 2023 but shouldn't be a boon in and of itself, since we expect cash balances to remain strong in 2023, around 2019 levels.

Chart 9


Among emerging markets, the largest country of issuance--China--is expected to issue more debt this year despite a bumpy start after reopening the economy. We also believe there will be relief for the real estate/property builders sector, which has issued the most bonds of any nonfinancial corporate sector in recent years. As with investment-grade companies, this is not expected to produce a surge of issuance at this time, but it should still support growth in 2023. The downside risk that the reopening of China could lead to more frequent, more disruptive COVID-19 outbreaks is a concern, as is the possibility that China's reopening could lead to higher-than-expected inflation in the rest of the world and force further monetary tightening globally.

We expect financial services issuance to expand 3% in 2023.  Bond issuance by financial services companies is off to a good start this year, largely because of strong issuance by European banks. The largest banks have reported profit growth for the fourth quarter while also building their buffers in anticipation of a recession. We accounted for this mixed picture in our base-case forecast of 3% growth, but as with nonfinancials, we see higher upside growth potential and acknowledge that declines could occur in a worst-case scenario.

Banks saw increased issuance in 2022, but issuance by all other financial institutions shrank--most notably brokerages (see chart 10). Some of this falloff is due to unusually strong issuance among global brokers in 2021. A more volatile market might have also led to a more cautious stance for brokers last year. That said, global brokerages have a large amount of debt maturing in 2023-2025, which, when combined with our expectations for a more favorable investment environment in 2023, could drive a modest pickup in their issuance this year. However, 2021's strong totals coincided with a surge in M&A activity, while the current pipeline has declined significantly, indicating that this won't be a tailwind in the near to medium term.

Chart 10


With the phaseout of the European Central Bank's third round of targeted longer-term refinancing operations (TLTRO III), bank issuance in Europe could rebound. Indeed, bank issuance there has started 2023 strong so far. However, it's still very early in the year, and banks may opt to continue issuing covered bonds in lieu of TLTRO phaseouts as well.

Annual issuance growth from China has been especially strong in recent years, with increases of about $200 billion in both 2019 and 2020 and a $172 billion increase in 2021--meaning annual growth rates of 53%, 34%, and 21%, respectively. Issuance fell 8% to $82.5 billion in 2022, however. A healthy refinancing pipeline--with over $1.9 trillion of bonds due between 2023 and 2025, based on face value--should limit the downside from rising volatility in global markets or from efforts to clamp down on leverage. Chinese issuance could also find support in the next few years as their largest global systemically important banks (GSIBs) work to build total loss-absorbing capacity (TLAC) buffers for 2025. Although this may largely involve substituting existing debt for TLAC-qualifying types, it could prompt some additional issuance this year to help bridge the gap.

Global structured finance issuance could decline about 7% again in 2023.   After $1.3 trillion of issuance in 2021--the most since the great financial crisis--global structured finance issuance lost momentum in the second half of 2022, ending the year at $1.2 trillion, representing a 7% year-over-year decline. Persistently high inflation, tightening monetary conditions, volatile energy prices, and escalating geopolitical tensions continue to plague markets, and we expect issuance to decline by a similar amount in 2023. Prolonged economic headwinds could further erode our issuance expectations.

We have maintained our 2023 structured finance issuance growth forecast from the previous quarter: -7% (with a range of -12% to flat) relative to last year. The forecast is based on continued issuance outside the U.S., though with risk toward the downside. Since last quarter, our economists lowered their GDP growth projections and continue to expect a shallow recession in the U.S. in the first half of 2023. While our overall issuance forecast is negative, we anticipate that the 2023 total will still land above 2018-2020 levels, but with mixed outcomes across sectors and subsectors.


While the U.S. represented 51% of the global structured finance market in 2022, this was a decline of nearly 10 percentage points from the previous year. The covered bonds sector--which is nonexistent in the U.S.--continues to lead the increase in issuance in the rest of the world. Accommodative monetary policy and elevated relative value compared with other bond types were the main drivers behind 2022 issuance growth in this area. Additionally, covered bonds are insulated from the wider issues disrupting markets--persistently high inflation, increasing interest rates, and stunted hiring--which may continue to support issuance.

Because the U.S. still represents more than half of the global structured finance market, we expect it to be the leading cause of overall issuance decline in 2023. While some sectors were more resilient than others through the first half of 2022, all four major sectors--asset-backed securities, collateralized loan obligations, commercial mortgage-backed securities, and residential mortgage-backed securities--were down substantially through the fourth quarter. Deteriorating macroeconomic conditions could put additional downward pressure on 2023 volumes.

U.S. public finance issuance is expected to expand about 5% in 2023.  Heightened market volatility and rising interest rates led to a 20% year-over-year decline in U.S. public finance issuance volume in 2022. This was the second-largest decline among asset classes this year, after nonfinancials.

We forecast 5% growth for 2023 but recognize the high level of uncertainty; the final rate of change could be higher, but there is also a chance of contraction. The major factors we're watching include a base case of recession, elevated interest rates, high inflation, as well as potential legislative gridlock, budget austerity or even a debt ceiling crisis in the new Congress. Many states appear to still have healthy reserves, which could limit any rebound in issuance, particularly in some of the states that typically issue the most debt.

International public finance issuance is expected to level off in 2023.  Of all asset classes, the least likely to feel the impact of higher policy rates and geopolitical stress is international public finance. But that is only because Chinese issuers are now accounting for even more of the total--81% in 2022, compared with 72% in 2021. Despite national policies aimed at reducing debt, we expect refinancing needs to keep Chinese issuers' totals strong this year. And Chinese debt markets are generally limited to domestic lenders with very little foreign involvement, in effect shielding issuers from rapidly rising rates across the rest of the globe.

Meanwhile, international public finance issuance from the rest of the world has contracted 39% relative to 2021. Of the countries that issued debt in both 2021 and 2022, only issuance out of Argentina increased relative to the same period in 2021, while China's total was essentially flat. We expect that the Chinese government won't significantly increase quotas for bond issuance by local and regional governments, which may lead to flat issuance or a slight decline. This may be offset somewhat if the rest of the world returns to more normal levels of issuance--about $250 billion--as interest rates stabilize. These offsetting factors may see flat issuance in 2023 for the sector, globally.

2022 summary

Global bond issuance in 2022 totaled $7.3 trillion, down 20.1% from 2021. Declines were seen across all asset classes, with the largest drops from nonfinancials (down 35%) and U.S. public finance (down 20%). Financial services tumbled 14.8%, followed by international public finance, which contracted 11.4%. Gains through most of 2022 for structured finance were erased in the fourth quarter, leading to a 2022 full-year decline of 7.2%. These figures cover only long-term debt--that is, debt with maturities greater than one year--and exclude debt issued by supranational organizations and sovereigns. All references to investment-grade and speculative-grade debt refer to issues rated by S&P Global Ratings.

U.S. Financing Conditions Become Less Restrictive On Market Optimism

While financing conditions remain restrictive, they have eased somewhat since the third quarter. A more optimistic tone has taken hold in markets as key measures of inflation suggest that price pressures may have peaked. Intermediate-term benchmark yields have rallied on expectations that central banks could pivot away from tightening monetary policy later this year.

Secondary-market credit spreads have tightened since the third quarter alongside the rally in benchmark yields. This likely was fueled in part by renewed demand for fixed-rate bonds after yields surged last year. But we have also seen secondary-market pricing for loans firm up, and speculative-grade spreads have rallied despite an ongoing risk of recession. Market expectations for a softening of restrictive monetary policy, along with optimism that the outlook for growth may not be all that painful for credit, are likely contributing to the rebound.

While secondary markets point to a more benign outlook for credit in 2023, primary markets remain restrictive for speculative-grade issuers. We have seen only $2.9 billion of 'B-' and 'CCC'/'C' rated bonds issued since June 2022--the only 'CCC'/'C' rated bond that was issued during that timeframe had a 14.4% yield-to-maturity on Jan. 19 and came from an issuer in the oil and gas subsector. Meanwhile, leveraged loan issuance will face headwinds in 2023 for as long as the macroeconomic environment suppresses investor demand.

Table 2

Indicators Of Financing Conditions: U.S.
Restrictive Neutral Supportive 2022 2021 2020
Currency component of M1 plus demand deposits--year-over-year change (%) x 8.3 43.1 44.3
M2 money supply--year-over-year change (%)* x 0 12.5 24.4
Tri-party repo market--size of collateral base (bil. $) x 4,281.2 3,728.5 2,361.3
Bank reserve balances maintained with the Fed (bil. $)* x 3,126.2 4,180.6 3,034.7
Three-month nonfinancial commercial paper yields (%) x 4.45 0.14 0.13
Three-month financial commercial paper yields (%) x 4.56 0.13 0.20
10-year Treasury yields (%) x 3.88 1.52 0.93
Yield curve--10-year minus three-month (bps) x (54) 146 84
Yield-to-maturity of new corporate issues rated BBB (%) x 5.66 2.86 2.72
Yield-to-maturity of new corporate issues rated B (%) x 8.81 6.31 7.00
10-year BBB-rated secondary-market industrial yields (%) x 5.56 2.68 2.32
Five-year B-rated secondary-market industrial yields (%) x 9.63 5.24 5.20
10-year investment-grade corporate spreads (bps) x 152 108 115
Five-year speculative-grade corporate spreads (bps) x 415 351 434
Underpriced speculative-grade corporate-bond tranches--12-month average (%) x 38.9 10.2 7.9
Fed lending survey for large and medium-sized firms§ x 39.1 (18.2) 37.7
S&P corporate-bond distress ratio (%) x 7.9 2.6 5.0
S&P LSTA Index distress ratio (%)* x 9.6 1.6 4.4
New-issue first-lien covenant-lite loan volume--rolling-three-month average (% of total) x 88.0 84.4 86.6
New-issue first-lien spreads--pro rata N.A. 381.3 400.0
New-issue first-lien spreads--institutional x 416.1 407.9 431.0
S&P 500 market capitalization--year-over-year change (%) x (20.6) 27.5 18.3
Interest burden (%)† x 6.1 7.2 7.9
Data as of Dec. 31, 2022, except where indicated otherwise. *Data as of Nov. 30, 2022. §Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices For Large And Medium-Sized Firms; data as of third-quarter 2022. †Data as of Sept. 30, 2022. N.A.--Not available. Sources: Economics & Country Risk from IHS Markit; Federal Reserve Bank of New York; Leveraged Commentary and Data (LCD) from PitchBook, a Morningstar company; and S&P Global Ratings Credit Research & Insights.
U.S. speculative-grade bond issuance plummets

After record-setting volumes in 2020 and 2021, U.S. speculative-grade corporate bond issuance plummeted to just $92.3 billion in 2022--the lowest total for any year since 2008. All speculative-grade rating categories recorded weak issuance for the year.

Over two-thirds of speculative-grade issuance in 2022 came in the first half. The pace of speculative-grade issuance meaningfully slowed in the second quarter as credit headwinds--inflation, supply-chain constraints, and other challenging macroeconomic factors--were magnified following Russia's invasion of Ukraine.

Volumes remained depressed the remainder of the year. Aggressive tightening of monetary policy by global central banks and a weakening economic outlook further pressured primary market activity, with issuance slumping further in the third and fourth quarters.

U.S. investment-grade corporate volumes also slowed as the year progressed. While total volume for the year was strong in 2022, it was bolstered by a surge of issuance in the first quarter--about 36% of annual investment-grade issuance came in the first quarter alone. The 'BBB' and 'A' categories had strong issuance for the full year, accounting for 88% of investment-grade issuance in 2022.

Chart 11


For the fourth quarter, considering both investment-grade and speculative-grade ratings, only the 'A' rating category saw strong issuance volumes. About 63% of 'A' category issuance in the fourth quarter was from financial services issuers.

Rated nonfinancial bond issuance fell to $507.7 billion and was weak across all rating categories in 2022. The nonfinancial sectors with the most issuance were high technology ($111.3 billion), utilities ($85.3 billion), health care ($58 billion), telecom ($38.4 billion), and consumer products ($35 billion). The only sectors with strong issuance in 2022 were high technology; utilities; and chemicals, packaging, and environmental services ($23.3 billion).

Rated financial bond issuance was down from the lofty levels of the past two years but remained strong with $487.4 billion in 2022.

Table 3

Largest U.S. Corporate Bond Issuers: Fourth-Quarter 2022
Issuer Sector Amount (mil. $)

Morgan Stanley

Banks and brokers 10,706.1

UnitedHealth Group Inc.

Insurance 8,957.2 Inc.

High technology 8,246.3

GE Healthcare Holding LLC

Healthcare 8,238.3

Oracle Corp.

High technology 6,992.0

Lockheed Martin Corp.

Aerospace and defense 3,977.1

Booking Holdings Inc.

High technology 3,518.1

PNC Finl Services Group Inc.

Banks and brokers 3,500.0

Thermo Fisher Scientific Inc.

Healthcare 3,226.4

US Bancorp

Banks and brokers 3,000.0

JPMorgan Chase & Co.

Banks and brokers 3,000.0

Honeywell International Inc.

Aerospace and defense 2,974.6
GACI First Investment Co. Financial institutions 2,875.0

Citigroup Inc.

Banks and brokers 2,750.0

Bk of NY Mellon Corp.

Banks and brokers 2,500.0
Includes issuance from Bermuda and the Cayman Islands. Sources: Refinitiv and S&P Global Ratings Credit Research & Insights.
U.S. public finance issuance plunges to end 2022

U.S. municipal bond issuance in the fourth quarter of 2022 was $70.6 billion, down from $96.2 billion in the third quarter, and down from the $119.4 billion in the fourth quarter of 2021. This is the lowest quarterly total since $65 billion was issued in the first quarter of 2018. Issuance fell month over month, from $28 billion, to $25.5 billion, to $17.2 billion from October through December. The December total was the lowest in a single month since $15.8 billion was issued in February 2014 (see chart 12).

We are operating under the assumption that issuance will increase about 5% in 2023. Our belief is that with divided government, there is a higher likelihood of austerity than stimulus. We're monitoring the effect of Fed policy on economic growth, and a sudden downturn could increase the need for state and local services.

Chart 12


Breaking out issuance into components, new money issuance rose to 80% of all issuance in 2022, compared to 66% for 2021. Refunding fell in terms of percentages, down to 12% from 23% last year, while mixed-use issuance was 8%, down slightly from 10% last year (see chart 13).

Chart 13


The three largest issuers in the fourth quarter were Pennsylvania, with a $1.8 billion revenue bond; New York City, with a $1.35 billion GO bond; and Massachusetts, with $1.3 billion in GO and refunding bonds.

Table 4

Largest U.S. Municipal Issues: Fourth-Quarter 2022
Issuer Amount (mil. $) Date

Pennsylvania Econ Dev Fing Auth

1,759.1 13-Dec

New York City-New York

1,350.0 5-Oct


1,337.9 19-Oct


1,231.5 26-Oct

Denver City and Co-Colorado

1,167.0 3-Nov


1,143.5 19-Oct

NYC Transitional Finance Authority

950.0 27-Oct

Black Belt Energy Gas Dt

896.6 30-Nov

Triborough Bridge & Tunnel Authority

770.0 8-Dec

NYC Municipal Water Fin Authority

750.0 17-Nov
Sources: Refinitiv and S&P Global Ratings Credit Research & Insights.

For full-year 2022, New York state issued the most debt--$49.3 billion, up slightly from the previous year. Texas was second with $47.4 billion, down 8.7% from 2021 (see table 5).

Table 5

Top 10 States By Bond Sales Through December 2022
2022 2021
State Rank Volume (mil. $) December volume (mil. $) Rank Volume (mil. $) Change from previous year (%)

New York

1 49,346.1 2,818.1 3 47,845.4 3.1


2 47,374.2 1,175.4 2 51,885.3 (8.7)


3 46,847.3 1,671.9 1 86,678.2 (46.0)


4 15,042.1 319.6 4 18,370.2 (18.1)


5 12,930.2 586.7 7 13,203.1 (2.1)


6 12,930.0 1,080.4 6 14,539.9 (11.1)


7 12,213.3 529.4 10 11,377.6 7.3


8 12,044.9 1,975.4 5 17,741.8 (32.1)


9 9,920.4 1,025.0 12 9,700.1 2.3


10 9,074.7 401.8 8 13,105.1 (30.8)
Sources: Refinitiv and S&P Global Ratings Credit Research & Insights.
U.S. structured finance issuance fell 21% in 2022

U.S. structured finance issuance reached $618 billion in 2022, a 21% year-over-year decrease. Rising interest rates amid broader market volatility caused appetite for longer-duration spread products to continue to slump in the second half, completely erasing gains of 36% and 7% through the first and second quarters, respectively (see chart 14).

As rates rise, the cost of debt for issuers increases, while investors tend to move toward more liquid markets. Nevertheless, interest rates remain below historical norms, and demand still exists for spread products. Higher risk-adjusted yield, coupled with the largely stable performance offered by many structured finance sectors, could remain attractive to some investors.

Chart 14


U.S. asset-backed securities (ABS) issuance saw the lowest year-over-year decline in 2022, down 9% relative to 2021. It will likely continue to carry overall issuance in the U.S. in 2023 but remain mixed across subsectors. Credit card ABS exhibited the largest year-over-year increase through December, which we attribute to the all-in cost-of-funds advantage, coupled with strong ratings performance. Commercial ABS (equipment and fleet leases) and personal/consumer loan ABS were also above their respective 2021 totals, which contributed to the more marginal decline in U.S. ABS relative to the other major asset classes.

Meanwhile, all other ABS subsectors fell below 2021 volumes. Auto loan and lease ABS--which generally lead U.S. ABS issuance at over 40% of total issuance in recent years--were poised to be the most affected by the Russia-Ukraine conflict because the region has important raw materials for auto production. With supply chain problems continuing to ease, and with the recent reopening of China, S&P Global Mobility expects a 4% increase in light-vehicle production in 2023, which could support the expansion of issuance in the sector. On the other hand, the increasing risk of global recession may still dampen this consumer-focused sector.

U.S. residential mortgage-backed securities (RMBS) issuance was down 23% year over year in 2022. Strong housing demand and supply shortages boosted strong home price growth in 2021 and into last year. While this eroded affordability, record-low mortgage rates supported RMBS originations through the first half of the year. However, housing demand has since contracted sharply as interest rates increased at a pace not seen since the 1980s. And with recession prospects increasing, we expect both loan originations and the issuance of U.S. RMBS deals to decline in 2023. While we expect issuance declines across the board, asset classes such as non-qualified mortgages (non-QM) and home equity lines of credit (HELOC) RMBS may continue to see investor support. Non-QM is more insulated than other asset types, as borrowers in this space are less rate-sensitive than others. Meanwhile, HELOC issuance could see growth as homeowners tap into robust equity built over the last few years.

Since ABS and RMBS are more consumer-oriented, they may be more susceptible to issuance declines tied to unemployment and changes in consumer spending. S&P Global Ratings economists expect unemployment to peak at 5.6% in fourth-quarter 2023, which will, in turn, soften consumer spending and decrease loan originations. Issuance on longer-duration assets such as residential mortgages could experience a larger decrease than shorter-duration ABS products. Even so, built-in structural protections could otherwise limit rating actions stemming from an increase in delinquencies or defaults (see "Global Structured Finance 2023 Outlook," Jan. 11, 2023).

U.S. issuance of commercial mortgage-backed securities (CMBS) hit a post-global financial crisis record in 2021 but slid 27% year over year in 2022. The rapid increase in interest rates, combined with wider spreads and broader uncertainty--especially about the future of office-space demand--will likely challenge 2023 issuance.

Structured-credit new issuance volume plunged 31% through the fourth quarter of 2022 following a record $187 billion for full-year 2021. However, the 2022 total ($129 billion) was still the second-highest total on record, slightly outpacing issuance in 2018 ($128 billion). The leveraged-loan market has also fallen behind last year's pace--by roughly 65%--setting the stage for declines in structured credit issuance in 2023. In addition, spreads remain considerably wider than they were a year ago. However, if spreads narrow and larger players return to market, new collateralized loan obligations (CLO) issuance could still see a rather strong year compared with pre-pandemic years.

Early Signs Of Looser Financing Conditions in Europe

Since the third quarter, global benchmark yields have rallied on expectations that inflation has peaked, with markets beginning to discount a possible central-bank pivot on monetary policy.

Secondary-market credit spreads have tightened considerably, despite the uncertain macroeconomic environment. However, primary-market activity remains subdued, especially at the speculative-grade rating level--we have yet to see a bond issue rated 'CCC' or 'C' be printed since February of last year. Uncertainty continues to sap investor demand in the primary market, and given our expectations for slower growth, uncertainty could continue to weigh on speculative-grade issuance in 2023.

Table 6

Indicators Of Financing Conditions: Europe
Restrictive Neutral Supportive 2022 2021 2020
M1 money supply--year-over-year change (%)* x 2.5 10.1 13.6
M2 money supply--year-over-year change (%)* x 5.1 7.1 10.1
ECB lending survey of large companies§ x 17.00 0 14.00
Yield-to-maturity of new corporate issues rated A (%) x 2.229 0.482 0.729
Yield-to-maturity of new corporate issues rated B (%) x 11.27 3.75 6.77
European high-yield option-adjusted spread (%)† x 4.98 3.31 3.55
Underpriced speculative-grade corporate-bond tranches--12-month average (%) x 55.28 18.12 28.14
Major government interest rates on 10-year debt x
S&P LCD European Leveraged Loan Index distress ratio (%) x 9.91 0.57 2.56
Rolling-three-month average of all new-issue spreads: RC/TLA (Euribor +, bps) 345.8
Rolling-three-month average of all new-issue spreads: TLB/TLC (Euribor +, bps) x 465.1 427.0 402.8
Cov-lite institutional volume--share of institutional debt, rolling-three-month average (%) x 91.7 94.3 95.3
Data as of Dec. 31, 2022, except where indicated otherwise. *Data as of Nov. 30, 2022. §European Central Bank Euro Area Bank Lending Survey for Large Firms; data as of third-quarter 2022. †ICE BofA Euro High Yield Index Option-Adjusted Spread. N.A.--Not available. N/A--Not applicable. Sources: Economics & Country Risk from IHS Markit; ECB; Leveraged Commentary and Data (LCD) from PitchBook, a Morningstar company; FRED; and S&P Global Ratings Credit Research & Insights.
European speculative-grade bond issuance plunges to record low

Following record issuance in 2021, speculative-grade corporate bond issuance in Europe sank to just €59.4 billion in 2022--the lowest total since 2012. All speculative-grade rating categories posted weak issuance for the year.

Over 44% of speculative-grade issuance came in the first quarter last year, but slowed quickly as markets froze following the start of the Russia-Ukraine conflict. Speculative-grade issuance remained sluggish through all four quarters, but we did see some thawing of primary markets as 'BB' category issuance picked up slightly as the year progressed, and as 'B' category issuance picked up marginally in the fourth quarter. The first 'B-' rated bond issue to print since May was issued in October by a financial services company at a yield-to-maturity of 10.87%. We have yet to see any bond issues rated 'B-' or lower since.

Total investment-grade volume for the year was strong, but nearly 35% of that volume came in the first quarter alone. Investment-grade volume slowed through the third quarter before picking up slightly in fourth-quarter 2022. For the full year, 'AA' was the only investment-grade rating category with weak issuance.

Chart 15


For the fourth quarter, considering both investment-grade and speculative-grade ratings, the 'AAA', 'A', and 'BBB' rating categories saw strong issuance volumes. About 70% of all issuance in the fourth quarter was from financial services issuers.

Rated nonfinancial bond issuance fell to just €207.1 billion and was weak across all rating categories except 'BBB' in 2022. The nonfinancial sectors with the most issuance were utilities (€45.7 billion), consumer products (€33.3 billion), high technology (€19.8 billion), homebuilders and real estate (€19.1 billion), and health care (€16.6 billion). Sectors with strong issuance in 2022 include utilities; consumer products; high technology; homebuilders/real estate; and chemicals, packaging, and environmental services (€11.5 billion).

Rated financial bond issuance remained strong in 2022 at €529.3 billion.

Table 7

Largest European Corporate Bond Issuers: Fourth-Quarter 2022
Issuer Country Sector Amount (mil. €)

HSBC Holdings PLC

U.K. Banks and brokers 8,391.4

Philip Morris International

Switzerland Consumer products 5,754.8

Societe Generale SA

France Banks and brokers 5,621.8

Credit Agricole S.A.

France Banks and brokers 5,463.4

Barclays Bank PLC

U.K. Banks and brokers 5,211.3

Credit Suisse Group AG

Switzerland Banks and brokers 4,972.3

Electricite de France S.A.

France Utility 3,969.5


Luxembourg Finance company 3,516.5


Netherlands Banks and brokers 3,237.2

Banque Federative du Credit Mutuel

France Banks and brokers 3,123.6

TenneT Holding B.V.

Netherlands Utility 2,981.5

Enel Finance International N.V.

Netherlands Banks and brokers 2,960.7

Intesa Sanpaolo Spa

Italy Banks and brokers 2,695.3

Volkswagen International Finance N.V.

Netherlands Banks and brokers 2,500.4

Barclays PLC

U.K. Banks and brokers 2,405.3
Sources: Refinitiv and S&P Global Ratings Credit Research & Insights.
European structured finance volume up 17% in 2022 on strong covered bond issuance, investor-placed securitization down nearly 25%

European structured finance volume grew in 2022 on strong covered bond issuance, but momentum slowed in the second half. Eurozone covered-bond issuance ended the year up 68% versus 2021, with the main contributors being Spain, the U.K., Austria, Germany, and France--all of which had year-over-year growth rates in the sector near or above triple digits (see chart 16). The main factor behind this growth is normalizing central-bank policy, which has allowed for relatively inexpensive funding for banks to issue these debt securities. Further, elevated relative value compared with government bonds has also supported covered-bond supply and demand. However, lower scheduled redemptions could result in a slight decrease in issuance in 2023 (see "EMEA Structured Finance Chart Book," Dec. 8, 2022).

We expect future covered bond issuance to be largely influenced by market conditions and legislative developments. The normalization of consumer spending as the pandemic wanes, coupled with a significant rise in inflation, has led to slower growth in European bank deposits. In addition, the central bank set harsher terms for banks' liquidity schemes, which has raised incentives for issuers to tap into the covered-bond markets (see "Covered Bonds Outlook 2023: Sailing Through Choppy Waters," Dec. 8, 2022). Furthermore, the TLTRO, an ECB program initiated in response to economic pressure during the pandemic, recently underwent term changes that incentivize banks to repay funds earlier than the scheduled maturity date. With banks having ample liquidity to make such repayments without needing to rely on capital markets, this could spur banks' appetite for covered-bond issuance (see "European Structured Finance Outlook 2023: Close To The Edge," Jan. 12, 2023).

Primary issuance of leveraged loans in Europe declined substantially in 2022, to levels not seen in well over a decade. Decreased originations in the latter part of the first quarter through year-end affected the packaging of European CLOs, which ended 2022 down 39%. We expect leveraged loan originations to continue to decrease as interest rates rise, inflation stays elevated, and the Russia-Ukraine conflict continues to disrupt the European economy. A slowdown in M&A activity will also continue to drag on leveraged-loan and high-yield bond sales, further affecting CLO creation.

Eurozone RMBS issuance, supported by strong housing fundamentals and elevated consumer spending, contributed to year-over-year structured finance growth in the region of over 80%. Meanwhile, RMBS issuance in the U.K. also had a solid showing, down just 5% year over year following a relatively strong 2021.

While RMBS have historically driven the U.K.'s structured finance market, covered bonds remain the bright spot, up 190% year over year. The Bank of England increased its lending rate by a combined 325 basis points in 2022 to its highest level since 2008 in an effort to confront soaring inflation. (U.K. inflation is currently at 9.2% but is also down from a peak of 10.7%.) For the reasons mentioned above, covered bond issuance will likely continue to lead U.K. issuance in 2023.

Chart 16


Financing Conditions Ease In Emerging Markets, But Primary Markets Remain Slow

Emerging market spreads have tightened since the end of the third quarter, led by spreads in the Latin America region, which tightened 103 basis points. Spreads across all regions now appear to reflect relatively benign credit risk as we begin 2023. However, primary markets remain slow, and we have not seen volumes pick up since they plummeted in the second quarter of 2022. While speculative-grade bonds are a small proportion of total emerging-market issuance, even in an expansion, there have only been four such issues since the second quarter of 2022. Meanwhile, 'BBB' volume continued to slow into the fourth quarter--with just $676 million printing in the final three months of the year.

Dollar-denominated corporate-bond issuance in emerging and frontier markets fell to just $131.9 billion--the lowest annual volume since 2015. Dollar-denominated issuance was weak across all regions, with 73% coming from Asia-Pacific--$52.2 billion from Asia-Pacific excluding China and $44.4 billion from China itself.

Rated corporate-bond issuance from emerging and frontier markets dropped to $63.1 billion for the year--the lowest volume since 2008. Only the 'AAA' and 'AA' rating categories saw strong issuance for the year. Asia-Pacific (excluding China) led with $31.3 billion, or about 50% of all rated volume. Issuance was weak across all regions.

Chart 17


Most corporate bonds issued from emerging markets are unrated. In 2022, over 96% of issuance was unrated by S&P Global Ratings, and about 85% of issuance was unrated debt from China.

Overall corporate-bond issuance from emerging and frontier markets slowed to $1.8 trillion for the year but remained strong. The Asia-Pacific region saw strong volume, led by $1.5 trillion from China.

Chart 18


Chart 19


Table 8

Largest Corporate Bond Issuers In Emerging And Frontier Markets: Fourth-Quarter 2022 Rated Issuance
Issuer Country/Market Sector Amount (mil. $)

Hong Kong Mortgage Corp. Ltd.

Hong Kong Financial institutions 1,576.0

Latam Airlines Group S.A.

Chile Transportation 1,076.6

Mdgh Gmtn (Rsc) Ltd.

U.A.E. Financial institutions 985.8

Alpha Bank SA

Greece Banks and brokers 860.6

AIA Group Ltd.

Hong Kong Banks and brokers 846.1

National Bank of Greece S.A.

Greece Banks and brokers 754.9

First Abu Dhabi Bank PJSC

United Arab Emirates Banks and brokers 695.1

OTP Bank Nyrt

Hungary Banks and brokers 675.7
CII Mexico Banks and brokers 653.2

Ceska Sporitelna AS

Czech Republic Banks and brokers 500.6

Emirates NBD Bank PJSC

United Arab Emirates Banks and brokers 497.4


Hong Kong Banks and brokers 398.1

Piraeus Financial Holdings S.A.

Greece Banks and brokers 360.3

Bank of China Ltd.-Dubai Branch

United Arab Emirates Banks and brokers 299.3

Nova Ljubljanska Banka dd Ljub

Slovenia Banks and brokers 228.3
Sources: Refinitiv and S&P Global Ratings Credit Research & Insights.

Table 9

Largest Corporate Bond Issuers In Emerging And Frontier Markets: All Fourth-Quarter 2022 Issuance
Issuer Country/Market Sector Amount (mil. $)
China State Railway Grp Co. China Transportation 16,856.5
China Development Bank China Banks and brokers 13,534.5
Bank of China Ltd. China Banks and brokers 12,600.7
Industrial & Coml Bk Of China China Banks and brokers 12,522.9
Agricultural Dvlp Bk Of China China Banks and brokers 7,417.3
China Reform Holdings Corp. Ltd. China Banks and brokers 7,344.4
Ping An Bank Co. Ltd. China Banks and brokers 6,998.6
China Construction Bank Corp. China Banks and brokers 6,913.0
China Everbright Bank Co. Ltd. China Banks and brokers 6,676.4
Bank Of Communications Co. Ltd. China Banks and brokers 5,724.4
PLUS Bhd. Malaysia Financial institutions 5,619.1
The Export-Import Bk of China China Banks and brokers 5,202.1
Bank of Nanjing Co. Ltd. China Banks and brokers 4,932.6
State Power Invest Corp. Ltd. China Utility 4,559.8
Shanghai Pudong Dvlp Bk China Banks and brokers 4,176.8
Sources: Refinitiv and S&P Global Ratings Credit Research & Insights.
International public finance issuance declines over 10%, led by large declines outside of China

Through the first half of this year, international public finance issuance saw year-over-year increases, but it softened in the third and fourth quarters and ended the year down over 11%. Full-year issuance out of China was $858 billion, down only 0.5% from 2021, but the fourth-quarter total was particularly weak, at only $94 billion. China accounted for nearly 81% of the 2022 total, making it the main driver of global bond issuance for this sector. Since China's markets are largely limited to domestic investors, they were largely insulated from interest-rate hikes in the rest of the world. That said, local governments are piling on debt and will likely need to cut back or stabilize their debt loads--a dynamic that may become more complicated this year, depending on how the central government reacts.

Outside of China, issuance was down 39% in 2022, with nearly every country either showing sizable drops in issuance relative to last year or not issuing debt at all. Canada, Germany, and Japan accounted for about 74% of total non-China issuance, and Australia accounts for another 10.2%.

Data on non-U.S. public finance volume is not reliable for determining the true size of overall borrowing, but these numbers can point to major trends. In the four years prior to 2020, issuance was extremely high (over $630 billion each year, on average); in 2020, issuance exceeded the $1 trillion mark for the first time, only to break $1.2 trillion in 2021. For 2022, the total was still in excess of $1 trillion, but this level could be challenged in 2023.

Structured finance issuance growth outside of the U.S. and Europe grew 11% in 2022

Structured finance issuance outside of the U.S. and Europe increased 11% year over year in 2022. Issuance growth came largely from covered bonds, but Latin American repackaged securities and Canadian ABS also contributed.

On the other hand, Chinese structured finance issuance volume was down by more than one-third in 2022, largely because of measures to control the spread of COVID-19. The expected recovery of economic growth in China will likely lead to a modest increase in issuance in 2023, most prominently in dominant market segments like RMBS and ABS, as the property sector continues to develop and as the ongoing impact of COVID-19 on vehicle sales fades. That said, the pace of such a recovery is still uncertain, so risk remains.

Australian structured finance issuance was up 33% year over year in 2022, driven by a near 200% increase in covered bond issuance. While RMBS issuance has historically driven Australia's issuance, and increasing ABS issuance recently, overall securitization issuance through December was down 11% year over year, after 18% growth through the first half of the year.

Related Research

This report does not constitute a rating action.

Credit Research & Insights:Nick W Kraemer, FRM, New York + 1 (212) 438 1698;
Zev R Gurwitz, New York + 1 (212) 438 7128;
Jon Palmer, CFA, Austin 212 438 1989;
Brenden J Kugle, Englewood + 1 (303) 721 4619;

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