The great corporate bond binge: Where is all the cash going?

JUST this month alone, Amazon raised US$18.5 billion of debt while securing some of the lowest borrowing costs ever in the US corporate bond market. But with a multi-billion-dollar war chest, the e-commerce giant is not quite in need of the money. The cheap cost of borrowing has proven to be too tempting, and not just for already cash-flush Amazon. Global investment grade corporate debt issuance reached US$2.94 trillion in 2020, a 20 per cent increase year on year and an all-time record, showed data from Moody's Analytics.

This was largely driven by US dollar (USD) denominated bond offerings and new issues from US-domiciled issuers. USD-denominated offerings of investment-grade corporate bonds climbed 54 per cent from the previous year to US$2.014 trillion.

Corporate bond issuance among Singapore-listed companies also gained traction. Blockbuster issues this year include Singapore Airlines' recently-proposed additional fund raising exercise to raise S$6.2 billion via mandatory convertible bonds. This is despite the national carrier posting a smaller year-on-year quarterly loss of S$661.7 million for the three months to March.