Global bond issuance volumes hit a new high in January as borrowers sprinted out of the blocks to raise funds ahead of looming event and market risks. Governments, corporates and financial institutions raised US$530.84bn in the first month of 2017, according to Thomson Reuters data, eclipsing the previous record of US$501.59bn set in January 2013.
Leading the way was the US high-grade market, which had its second busiest month ever with US$177.42bn of issuance, just US$1bn shy of the tally in May 2016, according to IFR data.
Financial issuers provided a glut of supply halfway through the month, with US banks pricing large deals after reporting earnings.
But corporates such as Microsoft, AT&T and Broadcom priced the biggest deals, raising a combined US$40.55bn.
The pace of issuance so far this year has taken many by surprise. "The expectation this year was that supply would contract from a year ago," said Jason Shoup, senior portfolio manager at Legal & General Investment Management America.
"But there was always a little bit of a worry that what supply we got would be front-loaded, and we are absolutely seeing that now."
Bankers said uncertainty around president Trump's administration was clearly not stopping companies from hitting the markets to raise new debt.
"We've just seen the second busiest month on record despite the back-up in Treasury yields and one of the most controversial US presidents we've ever had," said one credit strategist.
"That in itself shows this has not been a deterrent for issuers to sell debt."
Despite the heavy supply in the US market, corporate spreads tightened over January, with Bank of America Merrill Lynch's C0A0 index in by 4bp versus Treasuries since the start of the year.
In Europe, too, the primary markets are booming even with the earnings season well underway.
Bankers have been taken aback by the aggressive nature of corporate funding over the last fortnight in particular, a period that ordinarily would have been subdued by earnings blackouts.
"In the past five or so years, markets have been so average that companies have just gone straight into blackout without doing a deal," one banker said.
But strong conditions and a desire to get ahead of the year's heavy political calendar have seen corporate volumes spike even as rates have sold off - 10-year Bund yields jumped 25bp in January.
"I think that people including myself underestimate how much of a difference strong markets can make in the minds of issuers. A company that on January 3 says 'I have no plans to issue' can change their mind very quickly if the market has spent the past week tightening. This basically produced an avalanche of issuers and a snowball effect, and as more deals got done, more were sucked into looking," the banker said.
And the snowball effect has not just been evident in the European corporate sector but in sovereign, supranationals and agencies, which has seen more than US$150bn of supply, and financials too.
"The mixture of business has been pleasing. We've had covered, senior, the new French and Spanish senior non-preferred, Tier 2, AT1 and insurance issuance," said Peter Mason, co-head of FIG banking for EMEA at Barclays.
"It's the first time in the last few years that we've ticked all the boxes in terms of products and major currencies, and indeed one of the best January periods in recent times in terms of breadth of business. The volumes we've witnessed speak to the strength of the market. The Trump reflation sentiment has played a key part in this strength."
The fear that rates will lurch higher on the back of rising inflation has pushed EM borrowers into the market too, with more than US$63bn of supply, more than double the amount raised last January.
The pace of global bond issuance in February is expected to remain robust, though maybe not quite as strong. In the US high-grade market, issuance in February over the last three years has averaged US$99.35bn, according to IFR data.
Corporates are likely coming now to the primary market ahead of any volatility due to reforms implemented in the US by the new administration, and with elections due in several European countries including the Netherlands, France and Germany.
Indeed, BAML analysts reckon the US high-grade market will eventually see gross supply volumes fall by 17% in 2017.