US corporate bond market is most competitive ever: Barclays

[WASHINGTON] Strong demand for US corporate bonds has created the most competitive conditions on record across primary markets, and is spurring more trading in the secondary market too, according to Barclays.

US high-grade and junk bond markets are more competitive than at any time since 2017, according to Barclays’ Competition Index, which is the bank’s own version of the popular Hirschman-Herfindahl Index that measures market concentration and competition.

In the high-grade market, competition was 15 per cent higher in the first half of 2025 than it was in 2017, and about 30 per cent higher for junk bonds, Barclays strategists wrote on Wednesday (Feb 25).

Competition for high-grade bonds bigger than US$1 billion in size rose by about 30 per cent between 2017 and 2025, and by 26 per cent for high-yield offerings over US$750 million during the same period.

For its analysis, Barclays looked at more than 10,000 high-grade and high-yield bond issues between January 2017 and June 2025, as well as over one million individual allocations to initial investors reported to Trace.

The bank attributes the robust investor appetite to the proliferation of funds competing for newly issued bonds, as well as growing demand from foreign investors and lower liquidity premiums in the secondary market.

Funds that trade in the primary market, including exchange-traded funds and index funds, have broadened participation in particular as they distribute demand across multiple vehicles, the strategists noted. More demand from US life insurers has also added to the competition.

Meanwhile, foreigners’ long-term corporate holdings have grown about 10 per cent year-over-year since 2024 – the first such back-to-back years of growth since the Global Financial Crisis, Barclays points out.

Investors who missed out on new bonds in the primary market are also fuelling more trading in the secondary market. Turnover in the first 10 days for high-grade bonds over US$1 billion in size rose to 26 per cent in 2025, a 73 per cent increase from 2017, according to Barclays. The bank says up to one-third of that growth can be attributed to the competitive conditions in the primary market.

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Meanwhile, the time taken for the first secondary market trade of a bond has nearly halved in recent years, to about 20 to 30 minutes from 60 minutes before 2022, according to Barclays.

At the same time, better liquidity in the secondary market has lowered risk premiums, or the additional compensation investors require to hold bonds that may be hard to sell fast. That in turn has led investors to seek out supply in the primary market more, Barclays notes.

Looking ahead, the bank expects record new corporate bond issuance in 2026, driven by higher refinancing needs, more leveraged buyouts and mergers and acquisitions, as well as greater capital expenditure driven by artificial intelligence and infrastructure investments. BLOOMBERG