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14 Securities Lending Market Report | H1 2025 15

Corporate Bonds

>>> European Corporate Bonds >>> U.S. Corporate Bonds

As the Fed has not cut rates in the current cycle as fast as other central banks, corporate funding costs (including for This first half of the year has proved to be a resilient one for the securities lending U.S. corporate bond market. The
EM names issuing in USD) have remained elevated. For some U.S. firms, the steady depreciation of the USD may have average value on loan increased both in Q1 and Q2, reaching $364bn, up by 23% YoY and $365bn, up by 22% YoY,
supported revenue, offering an offset to funding costs. Confidence appears to have remained intact for investment grade respectively. Additionally, a surge in average lendable increased by $4.3bn, 7% YoY in Q1 and $4.475bn 10% YoY in Q2.
firms as H1 IG issuance of $980 bn represented a 7% increase vs. 2024 with yields lower as markets shrugged off the The first quarter started with gradual uncertainty around In the special world, we find these names ranking as top
tariff and conflict-induced volatility. Indeed, North American investment grade credit spreads ended the first half roughly tariff policies put in place by the U.S. administration. The performers:
where they started (~51) having reached as high as 80 when the Liberation Day tariffs were announced.
first bulk of their tariffs imposed on Canada, Mexico, and
Taking H1 as a whole, U.S. junk bond sales slowed after a This translated into the securities lending market with H1 China forced investors to seek safe heaven assets focusing • New Fortress Energy (NFE): The company owns
and operates natural gas and liquefied natural gas
strong rebound in 2024, as economic uncertainty appears to corporate bond revenues up 6% YoY to $500m, driven by on investment grade rather than high yield as fear of infrastructure. Several bonds issued have been in the top
have prompted issuers to hold off on new deals. However, a 21% increase of average balances which offset a slight countries retaliating and an inflated economy grew. This earners in the first quarter, with current levels trading
as markets moved on from tariffs which saw the cost to fall (12%) in the average fee. This illustrates that whilst the brought the overall balance of volume on loans to increase within the average of -2000bps for the 8.75% note.
insure sub-IG debt in Europe spike 50% before falling back average lendable fee was lower, i.e. cheaper GC, borrowers with wider spreads reaching records from the past two years The company has been struggling since last year with
and trend downwards in a matter of weeks, many European appeared willing to pay for specials during periods of yet keeping the revenue up by 7% YoY in Q1. delivering supplies and is now looking to sell assets to
corporates took the opportunity to issue new debt, with volatility. Throughout H1 borrowers were fairly evenly Early April, the U.S. administration announced a 90 day reduce their debt.
June seeing the highest monthly volume of European HY split between cash and non-cash trades. The number of pause on tariffs, bringing a relief to the financial markets,
deals on record. securities on loan rose steadily in Q1 before trending lower which strengthened the confidence of investors, giving rise • Hertz Global Holdings (HTZ): HTZ offers which offers
for the period. to increased U.S. corporate bond issuance in high yield. renting and leasing of cars and has been trading at
an average of -124bps over the past six months. The
A second major tension was geopolitical, first with the company has been in the process of selling secured debt
growing tensions around the American and European due to missing earnings last year.
Fig 3 - S&P Global
different attempts to end the war in Ukraine, and the several • Cable One, Inc (CABO): Cable One is a cable company
Global Corporate Bonds Lendable and On-Loan conflicts happening in the Middle East. This translated in an which has been facing incremental competition in the
escalation of military and defense spending. This element
4.70 0.38 of market volatility came to reinforce investment-grade cable universe and was trading in the areas of 65bps.
Lendable Value (Trillions €) 4.50 0.36 On-Loan Value (Trillions €) several cuts in the near future brought relief to investors
spreads stability in Q1. The decision of the Federal Reserve
0.37
4.60
to maintain rates for the past eight months with hopes of
0.37
allowing them to seek interest in higher yield bonds in the
0.35
4.30
second quarter.
0.33
4.20
0.32
4.10
0.30
4.00
Jan 2025 Feb 2025 Mar 2025 Apr 2025 May 2025 Jun 2025 0.31
Group Lendable On-Loan Balance