While issuance of high yield bonds strengthened across all key global jurisdictions in 2024, the US and Europe still face mounting maturity walls
High yield bond issuance in key markets around the world recorded major year-on-year gains in 2024.
In the US, high yield issuance rose by 52.4% compared to 2023’s output, reaching just over US$233 billion last year. Europe’s upswing was even more dramatic, with US$149 billion in high yield issuance in 2024 representing an improvement of 85.9% year-on-year. Both totals slightly exceed the average levels of annual issuance seen in the US and Europe pre-pandemic.
Overall Issuance by value 2015 – 2024
Instrument type: High yield bonds Use of proceeds: All
Location: Western and Southern Europe and USA Sectors: All Sectors
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In the Asia-Pacific (excl. Japan) region, high yield activity also performed well year-on-year—2024’s total issuance reached US$14.7 billion, up 78.2% from the equivalent figure in 2023. However, the 2024 total is still far below the levels recorded pre-pandemic (US$125.8 billion in 2019) and even in 2022 (US$23.4 billion).
Refinancing propels issuance in the US and Europe
Refinancing was the primary driver of issuance activity in the US and Europe throughout 2024.
In the US, high yield refinancing came in at US$170.2 billion—up 68.1% year-on-year—and accounted for almost three quarters of the total issuance in 2024.
The average yields to maturity of US high yield bonds stood at 7.67% in Q4 2024, down from 8.53% at the end of 2023. This allowed the issuers to refinance existing borrowings at lower costs than the year before, but not necessarily lower than their prior refinancing in earlier years where lower interest rates prevailed. The US market has also been buoyed by the lowest gap in decades for yields between corporate debt and less risky government debt. This has opened a window for issuers to raise capital at relatively lower rates, but still higher than the more recent lows in prior years.
In Europe, refinancing was also the main engine for high yield issuance, nearly tripling from US$34.1 billion in 2023 to US$94.6 billion in 2024 and accounting for almost two thirds of the overall issuance last year.
According to Debtwire, average yields to maturity in Europe’s secondary bond markets have declined for the past nine quarters. Average yields on single-B-rated notes are now sitting at 7.72%, while average yields on double-B notes have come down to 5.78%.
Debtwire also notes that issuance in Europe has been characterized by an increasing volume of floating-rate financing, accounting for more than a fifth of the high yield issuance since 2022. This has benefitted borrowers who have seen financing costs come down as interest rates have declined.
Maturity wall looms
Despite rising levels of issuance in 2024, US and European high yield bond stakeholders will have to navigate a tricky market in the next few years as sizeable debt maturities come into view.
Unlike loan markets in the US and Europe—which have pushed out maturities on most loans and should have ample capacity to digest approaching maturities in the coming years—high yield bond markets face much larger refinancing requirements.
In the US, Debtwire figures show that high yield bonds totaling US$160 billion are due to mature in each of the next two years, with another US$229 billion maturing in 2028 and US$307 billion in 2029. Refinancing will have to see a material increase from current levels to push back these maturities though this is likely to occur over a multiple year time horizon.
The European market is approaching a similar maturity wall, with the smaller high yield bond market holding twice as much debt in need of refinancing compared to the larger loan market. As in the US, high yield bond markets in Europe will have to refinance at significantly higher volume levels than they have over the past five years to clear a €225 billion wall of borrowing that matures in the next three years.
Interest rate tailwinds lift APAC
Similar to the US and Europe, around US$8.9 billion in refinancing issuance accounted for the bulk of issuance in APAC, representing more than 60% of the total issuance activity in 2024. However, looking ahead to 2025, many market participants currently anticipate that new money high yield deals will generate the bulk of activity, especially if interest rates decline further.
The key Chinese market is expected to be the principal driver of any material increase in issuance in APAC, with the stimulus measures and infrastructure investment by the Chinese government anticipated to play a positive role in encouraging economic growth.
Indeed, the recent performance of stock markets in China reflects the country’s sense of cautious optimism. Most notably, the recent release of DeepSeek’s AI technology, which has the potential of significantly bringing down AI implementation costs, has contributed to the more bullish growth outlook. The performance of certain companies in other sectors, such as electric vehicle manufacturer BYD, is also adding to the positive sentiment.
While higher tariffs and geopolitical tensions do present risks, China’s economy is finding its feet again after navigating the fallout from a credit squeeze in the real estate sector, which is good news for APAC high yield markets.
In an encouraging sign for the market, Greentown China Holdings Limited issued US$500 million 8.45% senior guaranteed notes due in 2028 in late February, which, according to public sources, was the first large-scale debt offering by a major Chinese real estate enterprise since 2023.
Overall, the high yield bond markets enjoyed a resurgent 2024, fueled by refinancing-related issuance and economic conditions that are slowly improving. There are reasons to believe that the momentum will largely carry over into 2025, although the market does face new challenges, especially the impending wall of debt maturities. Lower interest rates have provided some relief, but sustained refinancing activity will be crucial to maintain market stability, with M&A volumes in the wings that could push levels to match higher volumes of prior periods if positive market elements align.
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