Despite Macroeconomic Volatility, High Yield Issuance Recorded Year-On-Year Gains In 2025 As Interest Rate Cuts And Investor Demand Lifted Activity Levels, Especially In The US
High yield bond markets posted steady year-on-year gains in issuance in 2025 as US rate cuts and higher investor demand for risk raised activity levels in a volatile year.
The US market was the standout performer, with annual issuance climbing for the third consecutive year to reach US$297.6 billion, representing the highest annual takings since the peak of the market in 2021 and up 27.7 percent compared to 2024.
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Meanwhile, European markets held steady. Issuance rose, albeit modestly, from US$149 billion in 2024 to US$151.9 billion in 2025. Although new money activity in Europe was limited, 2025 was still the second-best year for European high yield issuance on record, trailing only 2021’s output.
APAC (excl. Japan) high yield bond markets also saw issuance rise for a third consecutive year, recording a total value of US$16.6 billion, up marginally from US$14.7 billion the year prior. However, activity in the region remains well below the peak performance recorded in the five-year period from 2017 to 2021, when high yield bond issuance averaged almost US$100 billion annually.
Rate cuts lift US activity
In the US, three interest rate cuts from the Federal Reserve in 2025 encouraged dealmakers to come to market and capitalize on lower borrowing costs.
Refinancing accounted for the bulk of US activity, rising from US$170.2 billion in 2024 to US$198.1 billion in 2025, but it was large increases in new money issuance that stood out.
General corporate issuance more than tripled year-on-year to reach US$37.1 billion; M&A issuance (excl. buyouts) climbed from US$25.3 billion to US$41.6 billion; and issuance for buyouts rose slightly from US$7.6 billion to US$8.8 billion.
A resurgent US M&A market, which rose by 59.5 percent year-on-year to almost US$2.6 trillion in 2025, unlocked opportunities for lenders and investors to increase deployment after years of limited opportunities outside of refinancing. Large-scale capital expenditure on data centers and digital infrastructure, driven by rapid growth in the AI space, generated further momentum for new money issuance. These factors propelled new money issuance to 45 percent of overall US activity in the fourth quarter of 2025, the highest share since 2022, according to Debtwire.
As the cycle of central bank interest rates peaks and yields narrow, the market is well-positioned to support issuer financing requirements in 2026.
Europe waits on new money surge
European high yield bond markets were more cautious, and new money issuance was understated in comparison to the US.
Refinancings remained the engine of European activity, with refinancing issuance of US$97.1 billion accounting for just under two-thirds of overall issuance. New money activity was muted. General corporate issuance, for instance, made only incremental year-on-year gains, up slightly from US$40.7 billion to US$41.5 billion. Buyout-linked issuance and issuance for M&A made small contributions to overall issuance (US$8.2 billion combined) but remained far off their pre-pandemic averages.
Dealmakers expect European M&A to accelerate in 2026. This should boost new money opportunities, although geopolitical volatility could deter a meaningful recovery—the transatlantic dispute over Greenland’s sovereignty shook markets. Though tensions have eased, the possibility of similar clashes arising cannot be discounted.
In this context, European issuers remain on a cautious footing. Yields are down from the peaks recorded in 2022, but are still elevated compared to long-term averages, inhibiting issuer conviction. Investors, meanwhile, are focusing on credit quality, with Debtwire noting that the proportion of double-B-rated notes as a share of overall market volume represented nearly two-thirds of issuance in 2025, a record high.
APAC steady, but regional performance varies
As in Europe, high yield markets in APAC (excl. Japan) were largely flat in 2025, to a large extent due to the impact of global tariff disruptions on the region’s mostly export-driven economies and the sustained high USD borrowing cost. New money issuance was limited as a result, whereas refinancing (US$13 billion) accounted for almost 80 percent of the market in 2025.
Although activity overall was subdued, APAC’s high yield markets posted good returns in 2025 and are drawing renewed investor interest, according to Pinebridge Investments.
Following China’s real estate liquidity crisis, the APAC high yield market has evolved and diversified. This presents new opportunities for investors across a mix of geographies and industries, ranging from the Macau gaming industry to renewable energy plays in India.
Pinebridge notes that the credit profile of APAC issuers is improving. Defaults outside of the Chinese property bond segment are limited, maturities are manageable and upgrades to credit ratings outpaced downgrades in 2025.
APAC high yield issuance may have been flat last year, but the market’s strong underlying fundamentals, coupled with shifting investor attitudes about US portfolio exposures, should give Asian high yield issuers reason for optimism in 2026.
Overall, high yield markets continued their gradual recovery in 2025, supported by rate cuts, steady investor demand, and slowly improving fundamentals. While activity levels remain uneven, particularly outside the US, narrowing yields and a growing appetite for risk imply a supportive backdrop for issuers in 2026.
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