Global Debt Climbs Towards Fresh High As Companies And Countries Keep On Borrowing



Debt issuance rose to $5.02 trillion in the year to September 22, according to Dealogic, putting 2016 on course to beat the all-time high of $6.6 trillion recorded in 2006. CREDIT:AP

Global debt issuance is on course to hit a record high in 2016 as figures showed sales this year topped $5 trillion (£3.9 trillion) at the end of September.

Debt issuance rose to $5.02 trillion in the nine months to September 22, according to Dealogic, putting 2016 on course to beat the all-time high of $6.6 trillion recorded in 2006.

Record low interest rates have encouraged countries and companies to issue debt as central banks around the world try to stimulate growth.

The data also showed corporate issuance of investment-grade debt reached a record high of $1.54 trillion since the start of the year, up from $1.41 trillion in the same period a year earlier.

Dealogic's figures also highlighted the impact of the Brexit vote.

Sterling-denominated investment grade debt rose to $21.3bn in the first nine months of the year, up slightly from $20.9bn raised in the same period of 2015.

Volumes in July fell to their lowest since 2000 as the referendum result slowed issuance, with just $564m issued, according to Dealogic.

However, issuance is expected to pick up later this year following the Bank of England's decision to buy £10bn of corporate debt as part of its revamped bond-buying programme.

Sterling issuance in August jumped to six times the average following the Bank's announcement.

Green bonds - which raise money for environmentally friendly projects and often carry tax exemptions - are also rising in popularity. Activity surpassed full-year 2015 levels in September as volumes reached a record high, worth $48.2bn.

Mark Carney, the Governor of the Bank of England, has spoken out in favour of green finance, describing it as a "major opportunity" for investors.

In a speech last week, he said long-term financing of green projects in emerging markets could help to promote financial stability.

"By ensuring that capital flows finance long-term projects in countries where growth is most carbon intensive, financial stability can be promoted," he said.

More than $13 trillion of global sovereign and corporate debt trades at negative yields, highlighting the influence of central banks.

A SoftBank humanoid robot is pictured in Tokyo. Its acquisition of ARM Holdings pushed up UK M&A activity in the third quarter to its highest since 2008. CREDIT: REX

Separate M&A data published by Dealogic showed that global mergers and acquisitions (M&A) volumes fell to $2.5 trillion in the first nine months of 2016, down 24pc compared with $3.27 trillion in the same period last year.

The figures showed a decline in M&A volumes across Europe.

"This year, the UK Brexit vote in June, a turbulent election cycle in the US and a slump in equity capital raising globally have shadowed opportunities for companies considering acquisitions," Dealogic's report said.

By contrast, US inbound M&A rose to the highest on record, to $331.8bn in the first nine months of 2016.

Dealogic noted that while the UK had "a slow start to the year" with $74.9bn of activity announced in the first half of 2016, down 57pc on the same period a year earlier, it said SoftBank’s £24bn bid for ARM Holdings boosted M&A activity in the third quarter to $61.1bn, which represents the best third quarter since 2008.

Global data also showed technology replaced healthcare this year as the leading sector, with $465.3bn in deals.

Source: Global debt climbs towards fresh high as companies and countries keep on borrowing

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