US primary credit market competition hits record high as bond demand surges, report shows

Feb 25 (Reuters) – U.S. primary credit markets are now the most competitive on record, based on Barclays’ analysis of over one million investor records since 2017, driven by high demand for new corporate bonds.

The increased demand led to tighter allocations and heavier early-stage trading, as indicated by reports submitted to the Financial Industry Regulatory Authority’s (FINRA) system for reporting over-the-counter transactions in fixed-income securities.

A dataset constructed by Barclays from this system, Trade Reporting and Compliance Engine (TRACE), showed that issuances have increasingly “sold out” across a broader and more diverse investor base.

Barclays cited a mix of structural and cyclical forces, including a larger pool of funds competing for new-issue allocations, stronger foreign demand and higher coupons since the Federal Reserve’s 2022 rate liftoff, which have increased reinvestment needs.

Competition in the first half of 2025 was about 15% higher in investment-grade debt and roughly 30% higher in high-yield compared with 2017, a period already considered highly competitive, the report said.

The most liquid parts of the market saw the steepest rise of 30% to 35%, spanning major sectors such as banking, capital goods, consumer non-cyclical, consumer cyclical and technology, as well as large offerings and bonds with five- to ten-year maturities.

Unmet primary market demand is also feeding into secondary trading, as per the report, with turnover on deals larger than $1 billion rising to 26% in the first 10 days of 2025, up from 15% in 2017, with broader initial ownership boosting early activity.

(Reporting by Pritam Biswas in Bengaluru; Editing by Vijay Kishore)