Remember the maturity wall panic?

That was another bear narrative popularized in 2022 and 2023. Like a lot of such narratives, it’s in jeopardy.

The story was plausible. And eminently so. Rates remain miles above where they stood just a few years ago, and that means any company that needs to roll/refi will pay dearly.

That’s especially problematic for lower-rated corporates, given their daunting refinancing wall. Small-caps and “lesser” firms generally have a more demanding maturity schedule. The concern was (and still is to a certain extent) that they’d have to bite the bullet eventually. Bullet-biting isn’t especially conducive to one’s general well-being.

The first thing to note is that 2024’s seen a veritable supply bonanza. The second important point is that thanks to the bullish mood across markets, the refi math isn’t nearly as onerous as it was. Hold that latter thought.

I mentioned the issuance flood in the March 2 edition of the Weekly, but it’s time to broadcast it to the wider audience. The figure below shows the breakdown of monthly US corporate supply — i.e., high grade and junk.

As you can see, supply across January and February was a veritable tsunami. March is shaping up pretty solid too, with nearly $80 billion in blue-chip sales already.

On Monday of this week, 14 borrowers combined for nearly $22 billion in supply. As BMO’s Daniel Krieter noted, that marked “the third consecutive Monday that supply in the IG market exceeded $20 billion” and the sixth $20 billion single-day supply of 2024, “matching 2020 and 2021 for the most such days in the first quarter of any year on record.”

Indeed, blue-chip supply is set for a historic Q1 in aggregate. If March’s supply forecasts are realized, Q1 high grade issuance would exceed $520 billion. JPMorgan on Wednesday raised their 2024 full-year supply forecast to $1.31 trillion. As the figure below shows, that’d easily exceed 2023 and 2022 and rival 2021’s $1.4 trillion in blue-chip debt sales.

The bank’s Eric Beinstein described “an opportune time” for issuers “to raise capital at relatively attractive coupons with spreads near post-GFC tights.”

Of course, the crux of the matter is cost. And the concern wasn’t really blue-chip issuers. That brings us full circle, and rather quickly I might add in the context of my legendary disdain for brevity.

As Bloomberg’s Tasos Vossos pointed out on Wednesday, junk borrowers refinancing today would see their annual debt costs rise around 175bps. That figure in October of 2022 (when equities troughed for the cycle): More than 460bps. For IG, “peak refi penalty” (if you will) was roughly 250bps in 2022. It’s now around half that.

IG spreads, you’ll note, have been tighter just 4% of the time post-GFC, BofA recently remarked. Junk spreads just 3% of the time.