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The volume of riskier new debt issues keeps growing

That distant sound is the warning bell as bond investors’ desperate search for yield leads them down ever-risker paths.

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Global investment grade corporate bond new issuance slowed markedly in the first half of 2021, compared with the record-setting year before, when cash was king and companies were desperate to show equity investors and bank lenders that they could still raise large amounts of term finance.

No one was criticizing them then for lazy balance sheets. Shareholders were just trying to separate companies with the resources to survive Covid lockdowns from those that might not. And the ability to access liquidity was critical.

This year, it all looks very different. Companies sitting on large piles of unused cash are likely to attract the attention of private equity bidders and shareholder activists.

A lot of risky companies look like they’re sitting pretty on cash from government guaranteed loans … but at some stage they will have to start repaying

According to data from Refinitiv, global high-grade corporate new supply was down 18% for the first six months of this year compared with 2020, though the $2.4 trillion raised so far in 2021 is still the second-largest first-half volume figure ever.