LONDON (Reuters) - Investment banks globally raked in record fee income from managing corporate bond issues in the first four months of the year, data from Refinitiv showed, as companies scrambled to raise money to help them through the COVID-19 crisis.
Corporate bond desks earned $10.6 billion in fees in January-April, a 24% rise from the same period in 2019 — itself a record — the data showed.
Central bank stimulus to try and lessen the economic impact of the pandemic has made the corporate bond market an attractive fund-raising tool for companies.
The U.S. Federal Reserve announced earlier this year that it would include corporate bonds in its asset purchase scheme for the first time, as it looks to prop up an economy struggling to deal with the fallout of the spread of the novel coronavirus.
The ECB, meanwhile, announced a special Pandemic Emergency Purchase Programme, which also includes the purchase of corporate bonds.
As a result, many companies have issued debt to raise the funds they need to get through the global recession expected to follow the outbreak.
In the United States, highly-rated corporates issued a record $234.7 billion of bonds in March and another $203.4 billion in April.
“Corporate bonds are the single most important source of financing for the U.S. corporate sector. Therefore, it has been of utmost importance for the Federal Reserve to keep the capital market open,” said Markus Allenspach, head of fixed income research at Julius Baer.
“The strategy has been highly successful. Even before a single bond has been bought, credit spreads of both investment-grade and speculative-grade bonds have narrowed and new issue volumes skyrocketed.”
Overall bond fees, which includes those earned on sovereign debt issues, are also at a record high for the first four months of the year, at $13.9 billion.
The investment banking sector that has suffered most is mergers and acquisitions (M&A), with fees down 22% year to date, as the COVID-19 crisis hampers deal-making.
Reporting by Abhinav Ramnarayan; editing by Simon Jessop, Kirsten Donovan, Toby Chopra