Despite volatility on markets at the end of 2018, a trade war between the US and China, uncertainty over the Fed’s monetary policy, and a slowdown in global growth, credit growth remains solid.
Figures from financial company Wells Fargo shows that yield spreads on corporate bonds, especially on high-yield corporate bonds, widened. In addition, new issuance in the corporate bond market has picked up noticeably in the new year. In January, there was $117 billion of investment grade bonds and $17 billion of high yield bonds that were brought to market. “The $134 billion of total corporate bond issuance in January was above the average monthly run rate of 2018”, says Wells Fargo in a report.
Source: Bloomberg LP, Dealogic, Federal Reserve System and Wells Fargo Securities
Finally, regarding bank financing, growth in credit has also strengthened in recent months. Total bank credit was up by 5.0% year-over-year in the week ending January 23, more than a full percentage point higher than just a few months previously. Commercial and industrial loans (C&I) were up 11.0% relative to the same period in 2018. However, real estate loans are up only 2.9% on a year-ago basis.
Source: Bloomberg LP, Dealogic, Federal Reserve System and Wells Fargo Securities
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