* Highest US junk issuance for 2 years
* GRAPHIC: tmsnrt.rs/2mZsjlu
* Global corporate issuance up more than 50 pct -JPM
By Jamie McGeever
LONDON, March 15 The recent surge in U.S. rate
hike expectations has triggered a wave of activity in global
debt markets, as companies and governments scramble to raise
billions of dollars of funds before the Fed raises borrowing
By some measures, record amounts were raised.
The Federal Reserve is almost certain to raise rates later
on Wednesday for only the third time since 2006. Money markets
attach a 94 percent probability to a quarter percentage point
hike -- as good as guaranteed in financial markets -- while all
102 economists polled by Reuters expect it.
But this level of certainty has only been reached in the
last two weeks after speeches from senior Fed officials
including Chair Janet Yellen put a March move firmly on the
As recently as the end of February, money markets put around
a one-in-three chance on the Fed raising rates this month.
Last week saw the biggest amount of high-yield, or "junk",
bond issuance in the United States for two years, as companies
with a low credit rating scrambled to raise $15.8 billion in the
week to March 10. That's three times the weekly average so far
this year and around 30 percent of the year-to-date total.
Assets like equities, emerging market and corporate bonds --
especially high-yield debt -- are most sensitive to rising U.S.
Curiously, however, the surge in U.S. high yield issuance
coincided with Wall Street's biggest weekly fall of the year,
with the S&P 500 breaking a run of six consecutive weekly
gains to fall 0.44 percent.
This suggests stocks may be topping out after hitting a
string of record highs in recent weeks. Junk bonds may not be
"Junk bonds have rallied of late but a move to aggressively
tighten U.S. monetary policy could cause chaos in this sector,"
said Neil Wilson, senior strategist at ETX Capital in London.
A similar pattern may be playing out in emerging markets,
where companies and governments also have rushed to borrow
before borrowing costs goes up.
Bond sales by EM companies alone topped $75 billion as of
March 8, according to JP Morgan. February sales totaled $33
billion, compared with a monthly average of $20 billion in
recent years, the bank noted.
Sovereign EM issuance so far this year is just under $40
billion, already half of JP Morgan's full-year sovereign
issuance forecast for 2017.
One of the reasons behind investors' positive view of EM so
far this year has been stable U.S. rates and dollar-borrowing
costs. But that is starting to change.
Two- and five-year U.S. bond yields
are the highest since 2009 and 20011, respectively, as traders
price in three Fed rate hikes this year. Some see even more.
"Commodity prices have dipped lower and global growth is
unlikely to continue accelerating through (the second quarter.
Additionally, our expectation for the Fed leans slightly more
hawkish relative to the market," Jane Wei, emerging market
strategist at Goldman Sachs wrote in a note on Wednesday.
(Editing by Jeremy Gaunt)