Global corporate bond debt increased again in 2024 after two years of inflation-driven deleveraging. Most outstanding debt has a lower effective cost than prevailing yields, meaning debt servicing costs will likely increase going forward. Since 2008, the link between corporate debt and investment has been severed, with debt issuance significantly above pre-crisis trend while investment has stayed below trend. Instead, debt raised in the last two decades has been used primarily for financial operations. The outstanding debt stock is therefore unlikely to pay itself off through returns on productive investment. Current global policy uncertainties raise concerns about the stability of foreign investor demand, a critical part of major corporate debt markets.
Global Debt Report 2025
Abstract
This chapter illustrates recent developments in corporate borrowing, estimates the future costs of increased interest rates and discusses the prospects and implications of a widespread corporate deleveraging. It also seeks to assess market vulnerabilities and susceptibility to shocks. The main body of the chapter concentrates on corporate bonds, but developments in the syndicated loan and private credit markets are also discussed.
The corporate debt stock is growing again. The global corporate bond market reached USD 35 trillion in outstanding amounts in 2024, resuming a long-term trend of more than two decades of consecutive debt increases that came to a temporary halt in 2022.
Debt servicing costs will likely increase from current levels despite falling interest rates. Nearly half of global corporate bond debt currently has an interest rate of 4% or less. There is a disparity between the cost of outstanding debt and the current cost of debt: globally, at the end of 2024, 63% of investment grade debt and 74% of non-investment grade debt had interest costs below the prevailing market rates. Even if central bank policy rates continue to fall as expected, most outstanding debt will likely be refinanced at a higher cost.
Increased interest payments are relatively minor in the near-term. The debt coming due between 2025 and 2029 has an average interest rate that is 148 basis points lower than end-2024 market rates, meaning relatively small increases in interest costs in the short term. However, if the effective cost of the outstanding debt stock increased by one percentage point, annual interest expenditure would grow by a total of USD 151 billion, to USD 784 billion.
Outstanding debt has primarily been used for financial operations rather than real investment. One of the most common reasons for issuing bonds in the last two decades has been to refinance existing debt. Other financial operations like building cash reserves and shareholder payouts have also been relatively prevalent. This has allowed companies to continuously decrease their effective cost of borrowing, but also implies that the outstanding debt likely will not “pay itself off” through returns on productive investments. Since 2008, there has been a disconnect between corporate investment and corporate borrowing, with investment currently below trend while corporate bond issuance is significantly above trend.
Global policy uncertainty adds to concerns about the stability of foreign demand. The continued withdrawal of central bank support for bond markets coupled with increasing levels of bond issuance means either new investors will have to fill the demand gap in certain segments of the market, or existing investors will need to increase their lending. Foreign investors, representing over a third of total holdings in some major markets, will play an important role, but global policy uncertainties, notably concerning international interest rate differentials and trade policy, raise concerns about the stability of their demand.
Corporate debt has been increasing across market segments. Growing corporate debt is not limited to bond markets. Syndicated lending, a USD 25 trillion market and a dominant form of borrowing for non-financial companies, has also grown significantly over time. Private credit, a type of lending that became substantial relatively recently, now amounts to at least USD 1.6 trillion in assets globally. Its increasing interconnections with the traditional financial system, including pension funds and insurance companies, coupled with multiple layers of leverage, call for regulatory and supervisory vigilance.
The last five years have been characterised by rapid and significant changes in global debt markets. Two decades of sustained debt build-up reached new highs on the back of substantial monetary and fiscal stimulus in the wake of the COVID-19 pandemic in 2020 and 2021, with global issuance amounts reaching historically unprecedented levels. That came to an abrupt end in 2022, as monetary policy tightened in response to the highest inflation levels in OECD countries in three decades. Policy rates increased faster than at any other point in recent history. The possibility of having to manage a scenario with prohibitively high rates in an environment of elevated debt levels was widely considered plausible, even if long average maturities and an overwhelmingly fixed-rate interest structure on corporate bonds would delay the pass-through of increasing rates, partially and temporarily insulating companies from the full effects of the new financial conditions.
Inflation has since declined sufficiently for such an outcome not to materialise. The global economy and financial markets have also proved more resilient than many expected. Inflation in late 2024 was at or below target in more than 60% of countries, and less than 1% above target in more than 75% (OECD, 2024[1]). Major central banks in OECD countries began easing cycles in mid-2024, and market-implied future policy rates point clearly downward across almost all major economies. Financial conditions remain supportive. Global default rates, while slightly above historical averages, have remained relatively subdued and are expected to fall below the four-decade average in 2025 (Moody's, 2024[2]).
Despite these tailwinds, global debt markets face an uncertain outlook. This is primarily driven by macro-level uncertainties, notably with respect to geopolitical risk and, closely interlinked, international economic policy (OECD, 2024[3]). Corporate disclosure – financial and non-financial filings and earnings call transcripts – suggests that while narrowly defined debt-related risks such as defaults and rating downgrades are a lesser concern, discussions about refinancing and geopolitical risks remain prominent (Figure 2.1). Such uncertainty can expose the market to bouts of volatility, the severity of which are difficult to assess in advance.
Concerns regarding geopolitical and refinancing risks remain elevated
Note: Refers to companies in the Russell 3000, Euro STOXX 600 and NIKKEI 225 indices. Mentions in corporate filings and earnings call transcripts.
Source: Corporate document analysis via Bloomberg, see Annex 2.A for details.
This, in turn, drives a broader uncertainty with respect to macro-economic outcomes and therefore interest rate paths, with effects on debt market dynamics. This is reflected in short-term changes in interest rate expectations. Figure 2.2 shows the intra-year swing (the difference between the highest and the lowest value in a year) in the 2-year Overnight Indexed Swap (OIS) in three major markets. A higher value implies greater changes in interest rate expectations within a single year. For the first time in recent history, this value has now been above historical averages for three consecutive years in the United States, the euro area and Japan, illustrating the uncertainty brought about by the inflation shock.
The last three years have seen significant volatility in interest rate expectations
Note: Based on differences between the highest and lowest value of the 2-year Overnight Indexed Swap (OIS) for each market in a given year.
Source: Bloomberg.
In addition, despite rapid reductions in policy rates and yields, interest rates have generally not fallen quite as rapidly as markets expected back in 2022. In the United States, policy rates are nearly 200 basis points higher than market-implied expectations back in March 2022, 141 points higher in the euro area, as much as 286 points in the United Kingdom, and 48 points in Japan. The one exception is China, where rates are 76 basis points lower than markets expected back in 2022, owing to weaker growth prospects (Figure 2.3).
Coupled with the fact that the return of high levels of inflation in 2022 led to the cessation of structurally important central bank support for debt markets through large-scale bond purchases – in effect removing a restriction on downward bond price pressure – this raises the question of whether current levels of debt can be sustained, and at what cost, or if widespread deleveraging is needed. This chapter seeks to address these questions.
Markets have tended to underestimate the level of future policy rates
Note: Chinese data refer to the seven day reverse repo rate.
Source: Bloomberg.
The global debt stock is growing again after two years of real term decreases
The global outstanding stock of corporate bond debt stood at USD 35 trillion at the end of 2024, a real term increase of 1.4% from the previous year. This marks the return of a long-term trend of an expanding debt stock. Total corporate bond debt saw real term year-on-year growth for 22 consecutive years between 2000 and 2021, a growth streak that came to a temporary halt with the interest rate shocks of 2022 and 2023 (Figure 2.4, Panel A). It should be emphasised, however, that this brief period of decreasing debt was driven by elevated levels of inflation in 2022 and 2023, leading to a corresponding upward adjustment in real term debt for earlier years, rather than widespread active deleveraging. Net issuance (new issuance minus redemptions) in fact remained positive on aggregate throughout 2022 and 2023.
The outstanding amounts in 2024 represent a growth of 62% in real terms since 2008, at the onset of the post-crisis monetary stimulus. That growth has largely been driven by increased issuance by non-financial issuers, whose debt has nearly doubled and currently stands at USD 15.7 trillion (Figure 2.4, Panel A). Non-financial issuance has also become more concentrated at the lower end of the credit rating scale. Over half of all investment grade issuance since 2014 has been rated BBB, the lowest investment grade rating (OECD, 2024[3]). Consequently, the non-financial market segment was hit harder by the sudden change in financial conditions in 2022, contracting more than twice as much as financial issuance (Panel B).
The outstanding stock of corporate bond debt grew in real terms in 2024 for the first time in three years
Source: OECD Capital Market Series Dataset, LSEG; see Annex 2.A for details.
Both the level of debt and the way it is distributed between financial and non-financial issuers differ significantly across countries (Figure 2.5, Panel A). The United States has by far the world’s largest corporate bond market, totalling USD 11.4 trillion at the end of 2024, of which non-financial company debt represents more than 60%. This is followed by China, where total bond market borrowing amounts to USD 6.7 trillion. Financial companies are more dominant in China, representing over 60% of total outstanding amounts. The same is true in many OECD countries – the share of financial company debt in the total debt stock is over 60% in 24 out of 38 member countries. This dominance is particularly pronounced in bank-based European economies: financial company debt makes up an average of more than 70% of total debt in France, Germany, Italy and Spain.
There are also stark cross-country differences in the size of corporate debt relative to the size of the economy. Total corporate bond debt amounts to more than 50% of GDP in nine OECD countries. Luxembourg has by far the highest ratio (447%), owing to its role as a major financial centre and headquarter of major institutions, combined with a relatively small domestic economy. There are similar dynamics at play in the Netherlands, due many major international companies using it as their headquarters.
Most OECD countries have seen an increase in leverage over time: since 2008, debt-to-GDP ratios have increased in 30 out of 38 countries, by nine percentage points in the median country. Only three OECD countries have seen substantive deleveraging since 2008: Iceland, Ireland and Portugal, all of which were very significantly impacted by the 2008 financial crisis. Consistent with trends in sovereign debt, emerging markets are less intensely indebted than advanced economies. Among the emerging markets in the G20, only China has a corporate bond debt-to-GDP ratio of more than 15% (Figure 2.5, Panel B).
Global corporate bond markets are concentrated in a few countries
Note: Based on companies’ country of domicile.
Source: OECD Capital Market Series Dataset, LSEG, see Annex 2.A for details; IMF.
Higher-risk market segments have also rebounded
Riskier market segments were naturally hit more severely by the interest rate shock in 2022. Investment grade companies – with the exception of financial companies in 2009 – have had positive net issuance in every single year since 2000, meaning the total debt stock has been consistently growing. As noted above, this has been sustained throughout the recent period of tightening monetary policy (Figure 2.6, Panel A). The same is not true for non-investment grade issuance, which turned sharply negative for non-financial companies in both 2022 and 2023. While this has happened before during periods of market strain (notably in 2008), the magnitude in 2022 was unprecedented. The 2022 contraction was 18% larger in real terms compared to 2008 for non-financial companies (Figure 2.6, Panel B). Financial company issuance also fell sharply but remained positive. These developments began reversing in 2024, as non-investment grade issuance turned sharply positive again for financial companies and, while still negative, returned to near-zero for non-financial companies as a result of falling interest rates.
Net borrowing by higher-risk issuers is increasing again after two years of active deleveraging
Source: OECD Capital Market Series Dataset, LSEG, see Annex 2.A for details.
Corporate bond markets are not, then, on a path to debt reduction. Lower rates compared to 2022-23, and downward-pointing future policy paths, have mitigated concerns about the sustainability of a large debt stock. However, most of the current outstanding debt was issued in an environment where interest rates were extremely low compared to current market rates. A similarly sized, or larger, debt stock therefore inevitably means that aggregate interest expenditure will increase in the coming years, as the existing debt matures and needs to be refinanced. The following section seeks to quantify these costs.
Increased corporate bond borrowing is not a negative development in and of itself. Debt markets can provide companies with financing for investment projects, often more countercyclical in character and less dependent on collateral than bank loans. The costs and risks of high levels of indebtedness at the macro-economic level must therefore be weighed against the economy-wide benefits that accrue from widespread access to financing. However, the higher the cost of debt, the greater the commensurate benefits need to be to offset increased expenditure. In this sense, changes in interest rates affect the character of the debt stock, with the possibility of rendering unsustainable debts that previously were not (Minsky, 1995[4]; OECD, 2024[3]).
Corporate interest payments have so far mostly been insulated from rate increases owing to widespread use of fixed-rate debt with long maturities
So far, no such development has taken place. Owing to long maturities and predominantly fixed-rate debt, the current cost of the outstanding bond debt stock is still very similar to what it was before 2022, when policy rates and yields were much lower. Almost half of all outstanding corporate bond debt globally had an interest rate of 4% or less at the end of 2024, more than 50 basis points below the US government’s 10-year borrowing cost at the same time.
Figure 2.7 illustrates how lower coupon buckets have become increasingly dominant in total debt over time, particularly since the 2008 financial crisis. In 2000, less than 10% of investment grade debt had a coupon of 4% or below. In 2024, the equivalent figure was 50%. Bonds with coupons above 6% represent 10% of total debt, down from 69% in 2000 (Panel A). Equivalent developments have taken place in the non-investment grade segment, where nearly a quarter of total debt cost less than the average US 10-year benchmark yield at the end of 2024 (Panel B).
Corporate borrowing costs have shifted structurally lower since 2008 and remain low
Note: Where coupon data are not available, the yield to maturity at issuance is used. GFC = 2008 global financial crisis.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details.
While rapid rate increases have not yet significantly affected the total debt stock, the increases are clearly visible in new flows. The global median interest rate at issuance has increased by 263 basis points for investment grade companies, up to 4.8%, since the nadir in 2021. The increase for non-investment grade bonds is 225 basis points, up to 7.3%, during the same period. As shown in Figure 2.8, this is substantially higher than the weighted cost of outstanding debt (dashed blue line). The difference between the cost of outstanding debt and the median rate at issuance is 98 basis points for investment grade bonds and 139 basis points for non-investment grade bonds. For the latter, the interest rate even on the twenty-fifth percentile of new issues (lower shaded green area) is more than 50 basis points higher than the effective outstanding cost.
The cost of issuing new debt is significantly higher than the cost of outstanding debt
Note: Refers to non-financial companies. Interest costs are based on coupons or, when unavailable, the yield to maturity at issuance. Full lines show medians, shaded areas show the range between the 25th and the 75th percentiles. The cost of outstanding debt is estimated for fixed-rate debt by weighing coupon buckets (in 50 basis point increments) by outstanding amount, see Annex for details.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details.
The extent to which this will eventually be reflected in the cost of the outstanding debt stock naturally depends on the magnitude of issuance at higher cost. As would be expected, issuance amounts by non-financial corporates are strongly inversely correlated with yields (Figure 2.9). This slows down the passthrough of higher yields to outstanding debt further, adding to the effects of dispersed repayment schedules and fixed-rate structures. In the last two decades, periods where yields have spiked above existing costs of debt have been short enough, and issuance has reduced sufficiently in those periods, that the weighted interest rate of the outstanding debt stock has barely moved. As shown in Figure 2.8, the cost of the stock has been on a linear downward trend with very little fluctuation, whereas yields, while also on a structural downward trend, have exhibited much more volatility.
However, in a high-debt environment with significant near-term refinancing needs, there is reason to expect that the pace of that passthrough might increase. The key assumption driving this is that, unlike earlier periods, yields will remain above the weighted cost of outstanding debt for an extended period.
Companies issue less when borrowing costs are higher, delaying the pass-through of increased interest rates
Note: The reference indices are the Bloomberg Global Aggregate Corporate Index for investment grade bonds and the Bloomberg Global High Yield Corporate Index for non-investment grade bonds. Both indices are in USD terms. Annual averages.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details; Bloomberg.
Managing higher rates in a high-debt environment
The magnitude of the disconnect between prevailing yields and the costs of outstanding debt makes the current period unique in recent history. At the end of 2024, 63% of investment grade debt globally had interest costs below the relevant reference yield, a proxy for the current cost of refinancing that same debt. This is down from a high of 77% in 2023, but still the second-highest share on record, 12 percentage points more than during the yield spikes following the 2008 financial crisis (Figure 2.10, Panel A). For non-investment grade bonds, the figure is 74%, together with 2022 and 2023 the highest since the 2008 financial crisis, when uncertainty and debt distress in the lower-rated segment brought yields high enough to exceed all outstanding debt (Panel B). During the 2008 period, the non-investment grade market was effectively frozen, with new issuance collapsing by nearly 75% (see Panel B of Figure 2.9). Yields then came down fast enough, aided by large-scale fiscal and monetary support, and remained low enough for the cost of the outstanding stock not to change.
The share of outstanding debt with an effective cost below prevailing yields is at the highest level in 25 years
Note: Refers to fixed-rate bonds issued by non-financial companies globally. The cost of outstanding debt is estimated by weighing coupon buckets (in 50 basis point increments) by outstanding amount, see Annex 2.A for details. The reference indices are the Bloomberg Global Aggregate Corporate Index for investment grade bonds and the Bloomberg Global High Yield Corporate Index for non-investment grade bonds. Both indices are in USD terms.
Source: OECD Capital Market Series dataset, LSEG, see Annex for details; Bloomberg.
This time, yields are coming down more slowly and debt levels are significantly higher. Of the investment grade debt coming due in the next three (five) years, 72% (65%) has a coupon of 4% or less. Similarly, over 60% of the non-investment grade debt coming due by 2029 has a coupon of 6% or less (Figure 2.11). On average, the debt coming due between 2025 and 2029 has an interest rate that is 140 basis points lower than end-2024 reference yields for investment grade companies and 156 basis points lower for non-investment grade companies. If all debt coming due in those years is refinanced at prevailing yields, it would amount to an average increase in annual interest expenditure on that debt of USD 34.1 billion and USD 11.6 billion, respectively, for investment grade and non-investment grade companies until 2030. Even when considering the cost increases facing issuers of unrated bonds, and other types of debt, additional expenditure tied to near-term refinancing remains relatively insignificant at the macro level and should not be difficult for the corporate sector as a whole to absorb nor pose broader economic challenges.
The cost of debt coming due in all of the next five years is significantly lower than 2024 year-end yields
Note: Panel B refers to fixed-rate debt. The cost of outstanding debt is estimated for fixed-rate debt by weighing coupon buckets (in 50 basis point increments) by outstanding amount, see Annex for details. The reference indices are the Bloomberg Global Aggregate Corporate Index for investment grade bonds and the Bloomberg Global High Yield Corporate Index for non-investment grade bonds. Both indices are in USD terms.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details; Bloomberg.
The magnitude would be much greater if the effective cost of the entire debt stock was to increase. If the cost of debt rose to equal prevailing yields in the final quarter of 2024, annual interest expenditure would grow by USD 108 billion to USD 605 billion for investment grade companies and by USD 32 billion to USD 168 billion for non-investment grade companies. In a scenario where the weighted cost of debt ends up 200 basis points above end-2024 levels (i.e. at 6%, up from 4% currently), global interest expenditure on corporate bond debt would amount to more than USD 935 billion annually. Even a relatively small increase in effective costs of one percentage point would increase annual interest expenditure by USD 151 billion (Figure 2.12). However, any such increase will happen very gradually over time. While interest costs at issuance and the effective cost of outstanding debt have tracked each other very closely in the last two decades (see Figure 2.8), this is because interest rates have trended structurally downwards. This relationship should not be expected to hold in an environment of higher rates. Companies refinance their outstanding debt when the cost of that debt is higher than prevailing rates. Naturally, they will not do the same when the inverse is true, slowing down the increase in aggregate costs and weakening its link with rates at issuance. Fixed-rate interest structures and a dispersed repayment schedule ensure that debtors are not heavily exposed to interest rate shocks on their corporate bond borrowing in the short term.
If the cost of outstanding debt increased by 200 basis points, annual interest expenditure would grow by more than USD 300 billion
Note: Refers to fixed-rate bonds issued by non-financial companies globally. Spreads relative to the estimated weighted cost of debt at the end of 2024. The indices used for prevailing yields are the Bloomberg Global Aggregate Corporate Index for investment grade bonds and the Bloomberg Global High Yield Corporate Index for non-investment grade bonds. Both indices are in USD terms. To capture all outstanding debt, total unrated bond debt (26% of aggregate outstanding amounts) has been assigned to the investment grade/non-investment grade group based on the distribution between investment grade and non-investment grade debt in total rated debt.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details; Bloomberg.
Debtors then have two broad options: deleveraging to reduce interest expenditure going forward or maintaining existing levels of debt at a higher cost. These two scenarios are covered in turn below.
Option one: Widespread deleveraging
An economy-wide deleveraging can take two forms. The first is passive, meaning the size of the economy (or revenues and assets in the case of an individual company) grows, reducing the relative debt load without actively devoting more money to debt servicing. A passive deleveraging can happen either through real economic growth or through increases in inflation – both of which serve to increase the nominal value of GDP, thus reducing the debt-to-GDP ratio for the economy as a whole. For OECD sovereign borrowers, for example, inflation contributed nearly twice as much as real economic growth to reductions in debt-to-GDP ratios between 2021 and 2023. Inflation-driven deleveraging, however, does not fundamentally improve long-term debt sustainability, since inflation premiums will eventually be priced into the cost of borrowing (OECD, 2024[3]). The second form is an active deleveraging, with borrowers simply devoting more of their cash flows to debt servicing, thus actively reducing the debt load (the numerator rather than the denominator in the case of the debt-to-GDP ratio). The global corporate bond market has not seen an active deleveraging at any point in the last 25 years. There is no indication that it is happening now either, given that net issuance was strongly positive in 2024, although this might change if interest rates remain significantly above the current effective cost of debt.
All else being equal, an active deleveraging necessarily implies that less funds are available for other uses compared to a passive one. As companies, governments and households devote more money to debt servicing, there will be less available for investment and consumption, with corresponding effects on economic growth. At a global level, the reduction in debtors’ funds available for consumption and investment is of course offset by a corresponding increase in creditors’ funds. However, because net creditors tend to have a lower propensity to spend, and because increased savings by these creditors are channelled to household and government debt to a greater extent than productive business investment, a shift in available funds from debtors to creditors will likely lead to a decrease in aggregate demand (Mian, Straub and Sufi, 2021[5]). In other words, larger fund flows to net creditors do not necessarily offset the negative effect on economic growth stemming from reduced funds available to net debtors.
What about the prospects of a significant passive, growth-driven deleveraging? This is the ideal scenario from a macro-economic perspective. Borrowing can effectively pay for itself over time if it is used for productive investments that enhance growth and therefore repayment capacities. This underscores the importance of differentiating between different types of borrowing, notably between debt used to finance real investment and debt used to finance consumption and operations outside of the real economy. In the short-term, investment and consumption borrowing have the same effect – increasing aggregate demand – but their long-term effects differ. Whereas the former can directly increase productive capacity, the latter does not (Mian, 2024[6]). How companies have used the debt they raised over the last two decades is therefore key to understanding the feasibility of “growing out of” that very same debt.
To estimate this, Figure 2.13 looks at what non-financial corporate borrowers indicate they will use proceeds for, based on over 36 000 bonds issued between 2000 and 2024. Up until the interest rate shock of 2022, financing different financial operations was by far the most common reason to borrow. Dominant among these were refinancing operations (Panel A), mentioned in 72% of prospectuses (weighted by issue amount) between 2000 and 2021. This is what has allowed companies to continuously reduce their effective borrowing costs (see Figure 2.8) in parallel to the structural decrease in yields over the same period. Debt-financed shareholder payouts (share buybacks or dividends) – in effect a way to reduce the total cost of capital when the cost of equity is higher than the cost of debt – also became more common during this period, mentioned in 9% of prospectuses (Panel D).
The sharp increase in the cost of debt has since had a profound impact not just on how much companies borrow, but also what they borrow for. Specifically, debt raised for real investment (such as capital expenditure and R&D) has become much more prevalent (Panel C), whereas debt financing for financial operations has become much less common (Panels A, B and D). In other words, flows in today’s debt markets are fundamentally different from those of the last two decades. As the cost of debt has increased, the rationale for issuing debt for refinancing, establishing cash reserves or financing shareholder payouts has decreased, with funds instead going to real investment.
Most borrowing in the two decades before 2022 was used to fund financial operations rather than real investment
Note: Based on 36 728 bond issues where the stated use of proceeds is more specific than "general corporate purpose". 169 unique stated uses of proceeds are manually classified into higher-level groups. Refinancing refers to operations to make payments on or restructure existing borrowing. Real investment refers to non-financial investment projects, e.g. "highways", "capital expenditure", "renewable energy, “R&D”. Financial management is non-refinancing operations that refer to balance sheet management, e.g. "invest in liquid assets", "cash reserves", "working capital". Shareholder payouts are either share buybacks or dividends. A bond can have more than one use of proceeds.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details.
Real investment being the most common purpose of borrowing is a relatively new phenomenon. Since most borrowing in the two decades prior to 2022 was used to finance activities other than investment, it is unlikely that the existing debt stock will provide the returns to pay itself off. This is particularly relevant for debt issued in the low-interest rate period between 2008 and 2022. While corporate bond issuance increased significantly above the historical trend during this period, corporate investment (measured as the sum of capital expenditure and R&D) did not, and has even been somewhat below trend in recent years (Figure 2.14). The cumulative bond issuance by non-financial companies between 2009 and 2023 was USD 12.9 trillion more than it would have been following the pre-2008 trend, whereas cumulative investment was USD 8.4 trillion lower compared to trend during the same period. In other words, increased borrowing since 2008 has not been associated with increased investment. This suggests that if a widespread, non-inflation driven deleveraging is to take place, it will likely need to be active in large part.
Companies have significantly increased their borrowing, but not their investment, since 2008
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details.
Option two: Maintaining current levels of debt at a higher cost
The second option would be for corporations to maintain (or even increase) current levels of debt by rolling over existing borrowing coming due rather than paying it off, with corresponding increases in interest payments as effective interest rates increase (see Figure 2.11 and Figure 2.12). Based on recent net issuance and outstanding debt trends, this seems to be the approach most closely aligned with reality. This will require investors to purchase greater amounts of debt. Given the withdrawal of central banks from bond markets, that money will either need to come from a new investor base, making up for lost demand, or the existing investor base will need to buy more debt. Understanding the demand structures that enable current levels of corporate borrowing – where demand is coming from, and how stable it is – is therefore an important element to assess these markets.
One of the intended effects of monetary easing initiatives worldwide in recent years, in particular quantitative easing (QE), has been to drive down long-term interest costs, including for corporations. Part of the dynamics through which this happens is by pushing more funds to riskier market segments in response to low and decreasing yields on safer assets such as government bonds. This is why QE has been found to increase corporate bond issuance (OECD, 2024[3]; US Federal Reserve System[7]; Gagnon et al., 2011[8]; Krishnamurthy and Vissing-Jorgensen, 2011[9]; Todorov, 2020[10]; Lo Duca, Nicoletti and Martinez, 2014[11]). The reversal of that process in the form of quantitative tightening (QT) will, therefore, lead to lower levels of demand for corporate bonds, riskier segments in particular, even though large-scale bond purchase programmes did not target these segments directly. Research suggests that the negative effect of QT has so far been significantly smaller than the (reverse) positive effect of QE, especially for passive QT, but the impact could increase in the future (Du, Forbes and Luzzetti, 2024[12]).
Foreign demand is a very important component of some corporate bond markets. Much like the broader economy, there has been a clear increase in financial market globalisation since the 1970s. In 1980, US corporate bonds were held predominantly by domestic investors – just 4% of total outstanding amounts were in the hands of foreign investors for both financial and non-financial company bonds. Since then, the market has seen sustained growth in international participation. Foreign ownership of non‑financial company bonds had climbed to 43% in 2020, more than 10 times higher than four decades prior. The foreign share fell sharply in 2022, but has since increased again.
Financial company bonds followed a similar trajectory (Figure 2.15, Panel A). The euro area, for which data are available for the last decade, has seen a decline in foreign ownership of non-financial bonds ever since the start of the data series in 2013, which accelerated with the COVID-19-induced crisis in 2020. Foreign ownership of financial company bonds has remained constant (Panel B). The Japanese market has not seen a corresponding decrease, but foreign ownership has never been very high in Japan. In the third quarter of 2024, foreign ownership of Japanese corporate debt securities represented 4% of outstanding amounts for non-financial companies and 6% for financial companies, similar to US levels in the early 1980s. However, there are signs that foreign ownership of Japanese non-financial company bonds has started growing following the shift in Japan’s monetary policy stance, increasing by more than 50% since 2022 (Panel C).
Foreign investors make up a significant part of total demand in major markets
Note: The following securities are considered: US – “corporate and foreign bonds” (includes bonds issued by US companies both in the United States and in foreign countries, but not bonds issued in foreign countries by foreign subsidiaries of US corporations); euro area – “debt securities” (long-term); Japan – “debt securities” (based on the Special Data Dissemination Standard Plus). Euro area and Japanese data series start in 2013 and 2015, respectively.
Source: US Federal Reserve, European Central Bank, Bank of Japan.
There are three key reasons to expect that current foreign demand dynamics may change: geopolitical uncertainties; changes in relative interest rates; and quantitative tightening.
First, in the short-term, geopolitical uncertainties may increase risk aversion and lead to shifts in expectations of relative returns, with impacts on international portfolio flows. There are also possible longer-term impacts. The level of uncertainty with respect to trade policy is currently high, in large part due to geopolitical tensions (OECD, 2024[1]). If these uncertainties end up ushering in new global trade environment, it may drive or accelerate shifts in domestic policy choices and economic models, notably reducing large surpluses underpinning current demand. This is by no means certain, and there should of course be corresponding changes in deficits over time, reducing borrowing, but at current levels of debt this possibility adds an aspect of uncertainty with respect to the stability of foreign demand.
Second, international interest rate differentials significantly affect foreign ownership. Since the monetary easing in the wake of the 2008 financial crisis, when many central banks brought rates close to zero, interest rates in major economies have tended to co-move more strongly than in other periods of recent history (Figure 2.16). The notable exception is Japan, which maintained an expansionary monetary position during a period in which other major economies tightened significantly, which has weakened the correlation. Structurally low yields domestically have therefore driven Japanese investment abroad for a long time, but divergent macro-economic developments are now reversing that trend. Whereas other major economies have generally begun softening their monetary policy stances in response to lower inflation, the Bank of Japan has increased rates. This shift in interest rate differentials has a large impact on the incentives of Japanese investors, making domestic investments more attractive, especially when considering returns net of currency hedging costs. These dynamics are already visible in sovereign debt markets, where Japanese investors’ net sales of lower-yielding European government debt have reached the highest levels in more than a decade (Novik, Smith and Keohane, 2025[13]).
This illustrates the possibility of similar large-scale shifts in foreign demand as long-held assumptions about interest rate differentials have to be reevaluated. This is particularly relevant for differentials between markets where interest rate correlations are high and have been increasing for the last years, since it exposes investors to unexpected reversals in correlations. For example, a divergence seems to be appearing between the ECB and the US Federal Reserve’s relatively more strict policy stance, again due to diverging macro-economic developments.
Policy rates have tended to co-move since 2008 in most major economies; markets are positioned accordingly
Source: OECD calculations based on data from LSEG.
Third, the withdrawal of central banks through quantitative tightening may impact foreign investment flows. The presence of central banks has been one of the main characteristics of global debt markets, sovereign and corporate, since the 2008 financial crisis. Central bank debt security holdings globally increased by more than five times between 2007 and 2022, reaching over USD 18 trillion (OECD, 2024[3]). That makes the withdrawal of these investors one of the defining features of today’s debt markets. It is therefore important to assess whether their presence has altered the character of global debt markets with respect to international demand and, consequently, what their absence might imply. For example, in the euro area, foreign ownership has more than halved (falling by 13 percentage points) since 2013. This appears to have been offset entirely by an increase in central bank holdings, which have grown by the equivalent amount. In other words, 100% of the 13 percentage point increase in central bank ownership corresponds to decreases in foreign ownership (Figure 2.17). Most of this is likely due to interest rate differentials (given the ECB’s more accommodative stance compared to other major central banks during the greater part of this period), but the figures raise the broader question of whether, if central bank intervention primarily crowds out foreign investors, foreign demand can be expected to increase again to offset the withdrawal of central banks under quantitative tightening. There are indications that this is happening in certain sovereign debt markets (see Chapter 1), but there are no guarantees that the same dynamics will apply in corporate markets.
Increases in central bank ownership of corporate bonds have been entirely offset by decreases in foreign ownership
Note: Refers to long-term (maturity > 1 year) debt securities issued by non-financial companies.
Source: European Central Bank.
In sum, sharp increases in interest rates have only very partially flowed through to the large stock of global corporate bond debt. The vast majority of outstanding debt currently has an effective cost significantly below prevailing yields. Interest cost increases will materialise eventually if yields remain above post-2008 averages for an extended period of time, but this change will be gradual and therefore should not pose major direct macro-economic challenges in the near term. Nevertheless, other challenges remain in global corporate bond markets. There are no signs of deleveraging, active or otherwise, taking place – on the contrary, the debt stock continued to grow in 2024. Maintaining this level of debt at a sustainable cost requires a sufficiently large, diverse and international demand base, but broader geopolitical and macro-economic uncertainties call the availability and stability of that demand into question.
The extent to which corporate bond markets are exposed to negative demand shocks also depends on characteristics of the market structure other than the level of foreign ownership. The degree of concentration is another important, but relatively understudied, aspect of debt markets’ susceptibility to shocks. It is an indication of market access from the issuer side as well as a determinant of broader market sensitivity to financial stress and the extent of fire sale risks. The increasing size of corporate bond markets in recent years is well established (see Figure 2.4), but whether and how that has impacted market structure in terms of concentration is less widely known. There are three broad types of concentration: at the issuer, investor and portfolio levels. These are covered in turn below.
Issuer-level concentration
Potential concentration on the issuer side provides important nuance to an environment of growing indebtedness – there are fundamental differences between a market that grows because more companies are borrowing and one that grows because a small number of companies are borrowing greater amounts. Figure 2.18 provides an estimate of issuer concentration by looking at the share of the largest companies, measured by total long-term debt on the balance sheet, in total outstanding corporate bond debt.
The most evident trend globally is that concentration is currently higher in the financial than in the non-financial sector. However, both current levels of concentration and developments over time differ substantially across countries. In advanced economies, representing three quarters of total global corporate bond debt, concentration has remained relatively constant over time, although financials saw an upward trend up until 2008. In 2024, the 100 largest financial (non-financial) companies owed 37% (28%) of total outstanding debt (Panel A). Both the current levels of concentration and developments over time are similar for financial companies in emerging economies, but with a more pronounced increase pre-2008. Contrarily, concentration has decreased among non-financial companies, with the top 100 firms representing 16% of total debt at the end of 2024 (Panel B). Globally, the 100 largest non-financial (financial) companies represent 22% (32%) of all outstanding debt.
At the regional level, given the smaller number of total issuers compared to broad income group aggregates, the measure instead looks at the ten largest companies. There are some notable trends. First, concentration in the non-financial sector is generally relatively low, below 15% in all regions below. Second, non-financial sector concentration has generally decreased over time. The notable exception is the United States, where the top ten share has been increasing since 2015. Developments in the financial sector are less homogenous. In the United States, concentration increased rather sharply up until the 2008 financial crisis but has since been on a subtle downward trend. In Europe, concentration has always been relatively low but has increased consistently over the last two decades. Chinese data are sparse up until 2010, but the available information suggests a sharp decrease in concentration up until 2019, after which it has begun increasing somewhat.
There is, in sum, no unequivocal trend toward either greater or lesser issuer-level concentration over time globally. Non-financial bond markets do appear to have diversified somewhat over the past years, whereas the opposite is true for financial companies. In both sectors, the largest companies represent very substantial shares of the total market. A market where the largest 100 issuers represent around a third of the total for broad country groupings must be considered rather concentrated.
The 100 largest issuers owe around a third of global bond debt, but there are large differences between markets
Note: The largest issuers in each year are defined based on the amount of long-term debt on the balance sheet. Top 100 companies for Panels A and B, top 10 companies for Panels C-F.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details.
The methodology in Figure 2.18 has some limitations when it comes to international comparability. Differences in the total number of issuers across markets mean that a simple top ten measure will naturally represent very different shares of the total domestic market. For example, more than 1 600 different Chinese financial companies issued bonds in 2024, compared to 380 in the United States. In addition, because the largest issuers are identified on an annual basis, concentration may appear to decrease if certain very large issuers refrain from issuing in a given year, since the numerator (outstanding bond debt by the ten largest issuers in that year) would fall compared to previous years whereas the denominator (total outstanding bond debt that year) would remain similar.
To account for this, Figure 2.19 constructs a different measure of concentration using a Herfindahl-Hirschman Index (HHI). The HHI is a commonly used measure of market concentration which accounts for the size of individual firms in relation to their sector (refer to the Annex for more detail). This is useful for international comparisons when the market size differs between countries since it will provide an indication of relative concentration. For example, a market where the top issuers represent 90% of total debt in equal shares and the remaining 10% is assumed to be distributed in small shares across a large number of companies would have similar HHIs whether 90% of the market was represented by 100 (HHI 0.018) or 1 000 (HHI 0.018) companies. What is most important is instead the distribution among the largest firms. If a market has only ten issuers, the HHI concentration index would be very different if total debt was split evenly between them (HHI 0.1) compared to if one issuer represented 50% and the remaining nine represented equal shares (HHI 0.28). Contrarily, in Figure 2.18, both would show a concentration of 100%.
The HHI takes a value from 0 (perfectly competitive/no concentration) to 1 (full concentration). There are no exact definitions of what HHI would indicate a concentrated market for the purposes of global debt markets, but regardless of what thresholds are used, Figure 2.19 offers an indication of relative concentration between markets (whereas Figure 2.18 offers a measure of “absolute” concentration at the regional/country level). The results are broadly similar. Financial corporate bond markets are more concentrated than non-financial ones in all regions (Panels A and B). The Chinese non-financial bond market is the most concentrated, whereas the United States, by a small margin, has the highest level of financial bond market concentration. One notable difference compared to Figure 2.18 is that Chinese markets appear to be more concentrated for both financial and non-financial companies using this measure.
Relative issuer-level concentration is highest in China and the United States
Note: The Herfindahl-Hirschman Index is an index of market concentration. Here it is calculated based on individual companies' outstanding debt as a share of the total debt within each region/industry combination, see Annex for details.
Source: OECD Capital Market Series dataset, LSEG, see Annex 2.A for details.
Investor-level concentration
Investor concentration (i.e. ownership concentration) can expose markets to sector-specific (or even investor-specific) shocks, adding volatility to bond prices (Huang, Wang and Wang, 2024[14]). Evidence from the banking sector also suggests that high creditor concentration can negatively impact financing costs for companies (Bonini et al., 2016[15]). Previous studies have established relatively high levels of investor concentration in major corporate bond markets (Li and Yu, 2022[16]; Boermans, 2015[17]). It is particularly important to consider the degree of concentration among investors that are prone to pro-cyclical behaviour, which can add to sales pressures during a downturn. Vehicles in which final investors can redeem their shares at will, such as an open-ended mutual fund or an ETF, are more prone to this than when investors have limited redemption opportunities (such as closed‑end funds or pension funds). The problem is exacerbated when the underlying asset is illiquid, as is the case for corporate bonds. It should be noted that the debate about corporate bond mutual funds and ETFs’ impact on market liquidity and fire sale dynamics is inconclusive and studies do not unequivocally find that open-ended bond funds contribute to fire sales. In addition to fund structure, regulation also plays an important role (OECD, 2024[3]; Shim and Todorov, 2021[18]; Choi et al., 2020[19]; Mirza et al., 2020[20]; Wang, Zhang and Zhang, 2020[21]).
Nevertheless, high concentration among investors who are exposed to redemption pressures remains a legitimate area to monitor. It also bears noting that domestic non-bank investors have largely offset the demand gap left by central banks following the cessation of QE, with investment funds playing an important role in certain countries (Du, Forbes and Luzzetti, 2024[12]). The rapid growth of open-ended investment funds and ETFs as dominant investors in corporate bond markets (see OECD (2024[3])) makes it important to identify the characteristics of this sector. This analysis therefore focuses on concentration among these funds (defined as open-ended funds and ETFs with at least 25% net exposure to corporate bonds).
There appears to be significant concentration in this fund sector. Globally, the ten largest funds represented 16% of global fund assets in 2024, a figure that grows to 37% when considering the top 100 funds (the total universe contains more than 12 000 funds with aggregate assets of USD 7.9 trillion in 2024). This concentration is particularly evident for funds focusing on investment in the United States, where the top ten (100) funds represent as much as 42% (84%) of total assets (Figure 2.20). However, while a relatively small number of funds own a substantial share of the total market, this does not by itself imply that the fund sector is prone to fire sale dynamics. Funds are collective investment vehicles, so what matters is ultimately the degree of concentration of end investors in these funds and the extent to which their trading behaviours correlate. At present, these data are not available for systematic analysis.
The world’s 100 largest corporate bond funds represent well over a third of global assets
Note: Refers to open-ended funds and ETFs registered globally that have at least 25% net exposure to corporate bonds (as a share of the total portfolio). Based on funds’ reported geographical focus area. The “All” category does not apply any restrictions based on investment area. The regional categories (Asia, Europe) include funds with country-specific focus (meaning e.g. China is fully included in the Asia category).
Source: Morningstar Direct, OECD calculations, see Annex 2.A for details.
Portfolio-level concentration
Investment fund portfolios are concentrated across at least two dimensions: in terms of the share of the largest holdings in the aggregate portfolio and in terms of geographic exposure.
There are notable differences across markets in the extent to which portfolios are concentrated in the top holdings, but average concentration is significant globally. Using the share of the top ten holdings in total portfolio value as a proxy, concentration is greatest among China-focused funds (42%), but the average for all funds globally is broadly similar (38%). US and Europe-focused funds exhibit lower levels of concentration, at 24% and 27%, respectively (Figure 2.21, Panel A). Concentration is typically lower in ETFs than in other open-ended funds.
In terms of geographic concentration, nearly half (46%) of total assets of corporate bond-focused funds globally are invested in the United States (Figure 2.21, Panel B). This US dominance has remained stable over time, even increasing somewhat, but the relative weights among other geographies have changed significantly. The last edition of the OECD Global Debt Report (2024[3]) illustrated a change in the geographic distribution of outstanding bonds globally over time, with the rapid growth of China and the relative decrease of Europe and the United States. There has naturally been a corresponding development on the investor side. Among corporate bond-focused funds, although investments in China represent only 2% (lower bound) of global assets, average exposure has grown almost nine times since 2012, with average exposure to advanced European markets decreasing by over nine percentage points in the same period.
The ten largest holdings make up a sizeable average share of portfolios globally
Note: Refers to open-ended funds and ETFs registered globally that have at least 25% net exposure to corporate bonds (as a share of the total portfolio). Panel A is based on reported geographical focus area of funds; the “All” category does not apply any restrictions based on investment area. It shows equal-weighted averages and refers to all holdings, including potential sovereign and sub-sovereign securities. Panel B shows the distribution in USD terms (based on the latest available fund size, weighted by average fund exposure in 2024). Geographic exposures refer to the entire fixed income portion of the portfolio.
Source: Morningstar Direct, OECD calculations, see Annex 2.A for details.
Concentration in US assets is visible both in broader fixed income markets and in corporate bond markets more specifically. US debt assets – sovereign, municipal and corporate – have attracted nearly USD 1.5 trillion more in cumulative net inflows since 2008 than the rest of the world together (Figure 2.22, Panel A). This is not just due to extensive sovereign borrowing in the United States (see Chapter 1), but also to the weight of US companies in global corporate bond market borrowing. In a major corporate bond ETF offering exposure to global investment grade companies by tracking the Bloomberg Global Aggregate Corporate Bond Index, nearly 56% of the holdings at the start of 2025 were US companies (Panel B). As suggested by Figure 2.15, a very substantial share of this investment refers to foreign investors. Global bond market developments are, in other words, very tightly linked to developments in a single market.
In sum, corporate bond markets appear to be concentrated across at least three dimensions. First, at the issuer level, a relatively small number of companies make up a substantial share of global debt. Second, at the investor level (for funds), the largest entities represent sizeable portions of total assets. Finally, at the portfolio level (also for funds), assets are largely concentrated among the top holdings and in one market (the United States). This should be considered against a backdrop of a long build-up of corporate bond indebtedness, rapidly changing financial conditions and a shift in the global investor base, most notably with respect to foreign participation and the withdrawal of central banks.
Bond investment is highly concentrated in the United States
Note: Panel A includes sovereign, municipal and corporate securities. US fixed income flows refer to US dollar denominated debt (Morningstar Global Categories "US Fixed Income" and "US Municipal Fixed Income"). The world excluding US refers to the total value for the Morningstar Global Broad Category "Fixed Income", subtracting US fixed income. Panel B shows the weight of holdings by market for a major ETF tracking global investment grade corporate bond markets, using the Bloomberg Global Aggregate Corporate Bond Index as a benchmark.
Source: Morningstar Direct, OECD calculations, see Annex 2.A for details.
Corporate bond markets are public and therefore allow for detailed analyses of changes in market dynamics, size, creditworthiness, investor base and so forth. With an aggregate size of USD 35 trillion, they serve as a powerful indicator of developments in corporate debt markets more broadly. However, they remain only one part of total corporate borrowing. Corporate indebtedness has also been growing outside of bond markets, including in markets with less public disclosure and regulatory oversight. The syndicated loan market is another important component, roughly comparable in size to the corporate bond market. In addition, the private credit market, while still much smaller than the bond and syndicated loan markets, has been growing very rapidly in recent years, raising concerns about transparency, deteriorating lending standards and unidentified interconnections between private credit and other market segments.
Syndicated loans
Syndicated loans offer firms access to large-scale financing from multiple lenders. A group of lenders jointly provide credit to a borrower, with one lender (the agent) coordinating the process on behalf of the syndicate. These transactions are typically structured either as term loans, which provide a lump sum with a fixed repayment schedule, or as revolving credit facilities that allow borrowers to draw funds up to a specified limit throughout the loan term.
The syndicated loan market has been active for decades and saw significant expansion in the 1990s (Armstrong, 2003[22]). Initially dominated by banks, syndication primarily functioned as a risk-sharing mechanism in corporate lending. However, the market has since evolved considerably, with non-bank lenders playing an increasingly prominent role. Institutional investors now participate not only through direct investments but also by repackaging syndicated loans into mutual funds and structured products like collateralised loan obligations (CLOs). The emergence of a large secondary market has further broadened access to a diverse range of investors, including retail participants (Mason and Goldwasser, 2024[23]).
At the end of 2024, the total outstanding volume in the syndicated loan market amounted to USD 25.4 trillion globally, reflecting a 31% real term increase since 2010, half the growth in corporate bond debt (Figure 2.23, Panel A). Issuance volumes peaked at USD 7.2 trillion in 2007 just before the global financial crisis, following a five-year upward trend. In subsequent years, issuance declined due to stricter banking regulations and capital requirements aimed at reducing risk in the banking sector. However, activity has picked up over time, and despite a sharp decline during the COVID-19 pandemic in 2020 – counter to developments in corporate bond markets, which continued to expand – issuance reached the second‑highest level on record in 2021 (Panel B).
The syndicated loan market shows signs of greater procyclicality than the corporate bond market, with steeper contractions during economic downturns. While the two markets are roughly comparable in terms of outstanding volumes and annual issuance, they differ in borrower composition. Syndicated loans are more heavily used by non-financial companies, which accounted for 84% of outstanding syndicated loan amounts at the end of 2024, compared to 45% in the corporate bond market. In terms of geographic distribution, US companies dominate borrowing, like in the bond market, representing half of all outstanding syndicated loans to non-financial firms worldwide (Panel C). European (22%) and Asian (16%) firms have slightly higher weights than in bond markets (OECD, 2024[3]).
Non-financial companies are the main users of the syndicated loan market
Note: Panel C is based on outstanding amounts.
Source: LSEG, OECD calculations, see Annex 2.A for details.
Albeit less pronounced than in the corporate bond market, there has also been a shift towards riskier borrowers over time in the syndicate loan market, as interest rate decreases have led to higher risk appetite among lenders (Lee, Liu and Stebunovs, 2017[24]). Between 2000 and 2012, investment grade loans represented 62% of annual non-financial borrowing on average, a share that declined to 57% between 2013 and 2024 (Figure 2.24, Panel A). In 2024, investment grade loans represented less than half (49%) of total borrowing. This trend is partly a reflection of rising demand from high yield investors and an increase in credit rating downgrades following economic downturns (McKinsey, 2024[25]). However, the growth in risk exposure has been concentrated in leveraged loans rather than in highly leveraged loans.
Syndicated loans are generally smaller in size than corporate bonds. In the US, the median loan size ranged between USD 161 million and USD 322 million from 2000 to 2024, whereas corporate bond issue sizes have been on a steady upward trend since 2000 with a median size of nearly USD 650 million in 2024. Europe has exhibited a different pattern, where the median syndicated loan was larger than the median corporate bond in the period before the 2008 financial crisis, reaching USD 675 million in 2005. However, over the last decade, the median loan size in Europe has converged with that in the US and is now smaller than the median corporate bond (Figure 2.24, Panel B).
Credit quality has deteriorated somewhat in the syndicated loan markets; floating rate loans are common
Note: Panel A is based on a restricted sample of observations with available yield information. Yield categories are based on spreads over base rate, see Annex.
Source: LSEG, OECD calculations, see Annex 2.A for details.
Another key difference between the two markets lies in the interest rate structures. While the vast majority of corporate bonds are issued at fixed rates, syndicated loans are predominantly floating. This difference is particularly evident in advanced economies: from 2014 to 2024, an average of 69% of syndicated loan issuance to non-financial firms had floating rates (Figure 2.24, Panel C). In the same period, the share of corporate bonds issued with floating rates was less than 10% in all years (OECD, 2024[3]). In terms of maturity at issuance, globally, syndicated loans typically have medium-term durations, with annual weighted average maturities around five years, shorter than those of corporate bonds. However, maturities of loans to companies in emerging markets have trended upwards, particularly during the last decade, with annual value-weighted maturities ranging between 7 and 11 years (Figure 2.24, Panel D).
Private credit
Once a small and specialised part of global finance, private credit has grown into a significant and diverse segment of corporate debt markets. This form of financing is provided by specialised non-bank entities outside the public bond market through direct loans or structured products. In 2024, private credit assets totalled at least USD 1.6 trillion globally, including USD 431 billion of undeployed committed capital (“dry powder”). By adding listed funds and middle-market CLOs, as well as semi-liquid and open-ended structures, estimates reach total volumes of around USD 2.1 trillion of private credit assets in the market (IMF, 2024[26]). The North American market accounted for 65% of the total, followed by Europe and the relatively smaller Asian market (Figure 2.25, Panel A). Growth has been very strong in recent years. In North America, the market grew at a real annual compound rate of over 11% between 2018 and 2023. Stricter regulations and tighter capital requirements on banks in the aftermath of the 2008 financial crisis were catalysts for growth, as it opened up an ideal segment for private credit of middle-market companies that were too large or too risky for commercial banks, but too small for public bond markets. In the United States, the sector today accounts for around 6% of total credit to non-financial corporations, comparable to the shares of leveraged loans and high-yield corporate bonds (Sløk, 2024[27]).
The global private credit market has grown 19-fold since 2000, driven primarily by US funds
Note: AUM data refer to closed-end, unlisted private credit funds.
Source: Preqin, OECD calculations, see Annex 2.A for details.
The most common private credit strategy is direct lending, representing about half of the total global volume. In this structure, loan agreements are negotiated directly with lenders, typically structured as senior secured term loans with a floating interest rate held to maturity. Other less frequently used options are distressed debt, special situations debt and mezzanine financing (Figure 2.25, Panel C). Similar to private equity funds, private credit investment vehicles are usually closed-end funds with a capital call structure and limited life cycle, accounting for around 81% of the total market (IMF, 2024[26]). Other vehicles include CLOs and, in the United States, Business Development Companies (BDCs).
Most private credit worldwide is allocated to companies active in the information technology (38%), industrials (12%), healthcare (11%) and financial & insurance (11%) sectors (Figure 2.25, Panel D). Proceeds are typically used for different financial operations. In the United States, 47% of deals disclose their intended use of proceeds as “general corporate purposes”, 26% for PE buyouts/leveraged buyouts (LBOs) and 21% for debt refinancing. In other words, almost half of private credit proceeds are used for financial operations rather than for productive investment. This is a lower bound, since the category “general corporate purposes” usually includes operations such as share buybacks or working capital needs (Federal Reserve, 2024[28]).
The appeal of private credit to borrowers and investors
For borrowers, private credit offers significant advantages in terms of speed, flexibility and privacy. Unlike syndicated bank loans, direct lending involves fewer parties (often a single lender) and avoids the strict prudential regulations imposed on banks. The transactions are tailored to the borrower’s specific needs and offer easier renegotiation in case of financial distress. Additionally, private credit avoids the extensive disclosure requirements of public markets (Ellias and de Fontenay, 2025[29]). There is also some evidence that private credit might remain more accessible during crises than public bond markets. In March 2020, at the height of the turmoil induced by the COVID-19 pandemic, private credit lending did not dry up, contrary to the high-yield bond and leveraged loan markets, both of which contracted significantly (IMF, 2024[26]).
For investors, private credit ensures portfolio diversification, constant income streams and the possibility of higher returns than many other fixed income products. The closed-end nature of most private credit funds, limiting the volume of redemptions during economic downturns, is well aligned with the long-term investment strategies of e.g. pension funds and life insurance companies. The floating rate structure of the loans also offers investors upside exposure when interest rates rise. In recent periods, private credit has offered higher returns than similar products such as high-yield bonds or leveraged loans. The main reasons for these higher returns are the lower levels of (visible) volatility and the illiquidity premium of private credit, since the loans are not traded on secondary markets and usually held until maturity. Moreover, borrowers may be willing to pay higher rates for quicker execution and the ability to avoid disclosing sensitive financial data (Ares, 2024[30]). According to industry analysis, between 2016 and 2023 senior private lending averaged annualised returns of 9%, outpacing leveraged loans and high-yield bonds (BNP Paribas, 2024[31]). However, some studies suggest that these excess returns disappear when accounting for fees charged by private credit funds and greater investment risk owing to certain equity-like exposures inherent to private credit products (Erel, Flanagan and Weisbach, 2024[32]). Some private credit deals in fact include equity-linked instruments such as warrants, which can account for 25-30% of the overall return, although the use of these instruments remains limited (PitchBook, 2024[33]).
Certain regulatory structures also favour private credit. In Europe, the regulatory capital requirement on insurance companies for direct loans is similar to investment grade bonds, and in the United States private loans do not trigger any additional capital charges above those required for equivalent public assets, while in both cases offering higher returns (Barings, 2023[34]; Candriam, 2021[35]).
Banks, insurance companies and pension funds are increasingly exposed to private credit
Private credit markets have significant links, both direct and indirect, to the traditional financial system. Globally, insurance companies and pension funds account for 86% of investment into private credit funds, followed by smaller entities such as sovereign wealth funds and family offices (ECB, 2024[36]; BIS, 2021[37]). In advanced economies, insurers and pension funds have increased their exposure to private credit funds by a factor of five over the last decade, in search of higher yields during a period when traditional fixed income offered very low returns (IMF, 2024[26]). Banks are also connected to private credit, both directly through credit facilities with the funds, and indirectly through bank loans to companies that are also financed through private credit (Figure 2.26). There has also been an increase in partnerships between banks and private credit investment firms recently, offering the latter access to banks’ extensive customer networks to source deals, and allowing banks to transfer loans that do not meet regulatory requirements (such funds operate outside of banks’ balance sheets) and offer clients new financing options. Banks also rely on so-called “synthetic risk transfers” to manage regulatory requirements, which allow them to sell part of the credit risk on loans to private credit funds, thereby reducing capital requirements and boosting revenues while keeping the loans on their balance sheet and maintaining existing client relationships. However, despite this growing interconnectedness, banks’ direct exposure to private credit remains low on aggregate. In 2023, a global survey of 32 banks actively engaged with private credit showed that banks’ private credit loan commitments represented less than 4% of total loans (Moody's, 2024[38]). Indirect exposures to risks in the market, however, may be significantly larger but are difficult to estimate given the multi-layered and complex structure of the ecosystem coupled with limited disclosure requirements.
Private credit funds are interlinked with the traditional financial system both directly and indirectly
Note: This figure seeks to illustrate possible connections between the main actors in the private credit ecosystem. This does not mean that every single actor is always and simultaneously exposed to all other actors in the way shown here.
It is also worth emphasising the strong links between private credit and private equity. Eighty-one percent of investment firms managing private credit funds also manage private equity funds (weighted by private credit assets under management), and about 70% of private credit deals come from companies sponsored by private equity firms. Additionally, over 86% of US private equity-backed companies’ borrowing in 2023 was through direct lending or institutional leveraged loans (IMF, 2024[26]). This is significantly higher than the aggregate composition of corporate credit in the United States, where loan financing represents only around a third of total credit, with bond financing accounting for the majority of debt capital (OECD, 2021[39]). Private equity firms are increasingly shifting their focus to private credit to address commercial banks’ growing reluctance to fund LBO activity, having private credit funds either directly finance LBOs or purchase bank-originated LBO debt (IMF, 2023[40]). In 2024, private credit funds financed as much as 77% of global LBOs (S&P Global, 2025[41]).
Another notable development in recent years is the growing interconnection between private credit/equity firms (investment firms) and insurance companies, in particular life insurers. Investment firms have had stakes in life insurers for a long time, but the connection has both intensified and changed in character in recent years. This was partly triggered by the low-interest rate environment in the wake of the 2008 financial crisis rendering life insurance annuities unprofitable for insurers, allowing investment firms to buy blocks of these annuities at discounts and reinvest them in higher-yielding assets. Some investment firms have since expanded their engagement with insurance capital by taking direct equity stakes in (and sometimes full ownership of) insurance companies. The investment firms thereby get access to additional long-term capital to fund their private credit origination. The long-term assets can then be invested in structured credit products like CLOs, generating steady, fee-related earnings. As a result, insurers’ risk profiles are changing, with studies showing that private equity-influenced insurers hold more illiquid assets than other insurers (IMF, 2023[40]; Vandevelde and Indap, 2021[42]).
Indeed, following a series of high-profile acquisitions and partnerships in the last years, the insurance industry is now a cornerstone of the private credit market. While the aggregate exposure to private credit of insurers and pension funds remains low at around 3.6% of total assets, they are very prominent in certain market segments (IMF, 2024[26]). Insurance companies funded 43% of the top seven listed private market firms’ credit assets at the end of 2024, representing more than half of inflows (Oliver Wyman, 2025[43]). For investment firms with private credit operations, there are two main incentives to take stakes in insurance companies. First, there is, as noted, a virtuous cycle between their capacity to originate credit (through the private credit operations) and insurance companies’ need for high-quality credit assets. Second, it allows the investment firm to use the insurance company’s balance sheet, together with external investment, to reduce the capital intensity of credit origination and, again through external investment, gain additional revenue through asset management fees and carried interest. Figure 2.27 illustrates one particular model of this approach. In Panel A, the investment firm controls an asset-backed private credit lending operation in which external investors also take a stake. This serves to simultaneously reduce its own capital intensity and generate fees and carried interest. In this simplified example, the lender’s originated credit (i.e. its loans to companies) are then allocated to (bought by) the insurance company. That can happen e.g. through allocation of part of a syndicated transaction, or as a structured product such as a CLO.
The insurance company may also invest directly in the private credit lending operation (controlled by the investment firm), earning the investment firm additional asset management fees. Panel B illustrates a specific example of a structure like this, whereby the insurance company’s equity assets are used to invest in the private credit fund, using an evergreen fund with external investors, further reducing capital intensity. As long as the insurer continues to grow its business (increasing annuity liabilities), it can use this continuous inflow of long-term capital to channel credit assets from the private credit operation onto its balance sheet, thereby shrinking the share of equity assets, thus freeing up space for more equity investment for a given equity-to-asset ratio. This new equity can then be invested into the evergreen fund again, creating a sort of virtuous capital cycle. Through these dynamics, the investment firm’s initial equity investment in the insurance company is transformed into a much larger injection into the private credit operation, first by using the insurance company’s equity assets, complemented by external investment in the evergreen fund. In essence, acquisitions of insurance companies by investment firms allow them to upscale their investments, while earning management fees and carried interest along the way.
Investment firms can upscale their investments through insurance companies
It bears noting that this is not the only model investment firms use to earn money through exposure to insurance companies. Another strategy used by some major firms has been to simply take a minority stake in an insurer, increase its asset allocation towards alternative assets, and earn fees for managing those investments (IMF, 2023[40]).
Private credit expands corporate access to financing, but broader financial stability risks remain largely obscure
The rise of private credit can expand credit access to sectors of the economy that would not otherwise have it. Studies show that borrowers in the private credit sector are often characterised by high leverage, low or negative earnings, lack of credit ratings and limited collateral, which are typical traits of early-stage and high-growth companies (S&P Global, 2021[44]; Federal Reserve, 2024[28]; IMF, 2024[26]).
A growing private credit market also carries potential risks. Because the loans are usually unrated, rarely traded and valued “marked to model”, meaning in a non-standardised way, and therefore sensitive to changes in assumptions, it is more difficult to properly assess risks in advance. While default numbers have been low compared to other similar instruments, the recent rise in payment in kind (PIK) provisions, which allow borrowers to defer interest payments by adding them to the principal, typically at higher interest rates, has raised concerns regarding the visibility of risks in the sector (Fitch Ratings, 2024[45]). Furthermore, the floating-rate nature of private credit can become a problem for debtors when interest rates rise rapidly.
Finally, two recent developments could also impact the market and the risk for investors and borrowers. First, while private credit funds are typically closed-end, the last years have seen an increase in semiliquid funds (i.e. allowing for more frequent redemptions), increasing the liquidity risk during episodes of economic downturn and financial distress. The recent emergence of private credit ETFs offering daily trading to attract retail investors adds to that risk. Second, recent announcements from major alternative investment managers seeking to build secondary marketplaces for private credit could fundamentally change the perception of risk in the sector (Bloomberg, 2024[46]). While this could provide end investors with greater visibility into the firms they are lending to, it would also increase the likelihood of fire sales and liquidity shortages in periods of volatility. Therefore, as private credit continues to grow, the risks inherent in the system, and especially its link to the broader financial ecosystem, demand further scrutiny.
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Data presented on corporate bond issues are based on OECD calculations using deal-level data obtained from LSEG on new issues of corporate bonds that are underwritten by an investment bank. The database provides detailed information for each corporate bond issue, including the identity, nationality and sector of the issuer; the type, interest rate structure, maturity date and rating category of the bond; and the amount of proceeds obtained from the issue and intended uses thereof.
Convertible bonds, deals that were registered but not consummated, preferred shares, sukuk bonds, bonds with an original maturity less than or equal to one year or an issue size less than USD 1 million are excluded from the dataset. Industry classifications are based on The Reference Data Business Classification (TRBC) from LSEG. Yearly issuance amounts initially collected in USD were adjusted by 2024 US Consumer Price Index (CPI).
Given that a significant portion of bonds are issued internationally, it is not possible to systematically assign issues to a certain country of issue. For this reason, the country breakdown is carried out based on the country of domicile of the issuer. The advanced/emerging market classification is based on IMF country classifications.
Rating data
Rating information is based on OECD calculations using data obtained from LSEG that provides rating information from three leading rating agencies: S&P, Fitch and Moody’s. For each bond that has rating information in the dataset, a value of 1 is assigned to the lowest credit quality rating (C) and 21 to the highest credit quality rating (AAA for S&P and Fitch and Aaa for Moody’s). There are eleven non‑investment grade categories: five from C (C to CCC+); and six from B (B- to BB+). There are ten investment grade categories: three from B (BBB- to BBB+); and seven from A (A- to AAA).
If ratings from multiple rating agencies are available for a given issue, their average is used. Some issues in the dataset, on the other hand, do not have rating information available. For such issues, the average rating of all bonds issued by the same issuer in the same year (t) is assigned. If the issuer has no rated bonds in year t, year t-1 and year t-2 are also considered, respectively. This procedure increases the number of rated bonds in the dataset and hence improves how representative the rating-based analysis is. When differentiating between investment and non-investment grade bonds, the final rating is rounded to the closest integer and issuances with a rounded rating less than or equal to 11 are classified as non‑investment grade.
Early redemption data
When calculating the outstanding amount of corporate bonds in a given year, issues that are no longer outstanding due to having been redeemed before their maturity date are deducted. The early redemption data are obtained from LSEG and cover bonds that have been redeemed early due to being repaid via final default distribution, called, liquidated, put or repurchased. The early redemption data are merged with the primary corporate bond market data via International Securities Identification Numbers (ISINs).
Cost of outstanding debt
The weighted average cost of debt is approximated for fixed-rate debt by calculating the total outstanding amount of debt across 26 coupon buckets between 0 and 1 250 basis points (increasing in increments of 50 basis points, i.e. 0 to 50, > 50 to 100, etc.). The resulting amounts are then multiplied by the midpoint cost of the corresponding bucket (e.g. 25 basis points for the 0 to 50 bucket, 975 basis points for the 950 to 1000 bucket) and divided by the total outstanding amount of all fixed-rate bond debt. The sum of those products yields an estimated value-weighted interest rate for all outstanding debt. All debt with coupons above 1 250 basis points are given a midpoint value of 1 275. Where coupon data are not available, the yield to maturity at issuance is used. For bonds that are not issued at par, this may differ from the coupon rate.
Investment fund analyses are based on OECD calculations using fund-level data obtained from Morningstar Direct. The dataset is split into nine broad categories (Morningstar Global Broad Category Group) based on the primary asset class orientation of the fund: Allocation, Alternative, Commodities, Convertibles, Equity, Fixed Income, Miscellaneous, Money Market and Property. In total, the dataset includes over 281 000 open-ended funds and ETFs.
To identify funds that actively participate in the corporate bond market, the dataset is restricted to a subset of funds with at least 25% net exposure (long exposure minus short exposure, as a share of the total portfolio) to corporate bonds as of the latest available observation (typically early 2025).
All-time series data (number of bond holdings, the share of the top ten holdings in the total portfolio, geographic exposure) are observed monthly. However, not every fund has data available in every month. Therefore, an average annual number (based on available month-end observations), is calculated for each fund. To calculate fund exposure in absolute terms, total fund size is multiplied by this average exposure. Only observations for which fund size is disclosed in 2024 or later are included in the analysis. Time series analyses include all funds that were alive in a given year, even if they have since been liquidated.
For analyses that are split by region, the fund’s investment area is used. This denotes the geographic area that the fund focuses its investments in and may be different from the fund’s domicile or region of sale. Broader regional categories (e.g. Asia, Europe) are manually classified and include funds with country‑specific focus (meaning e.g. China is fully included in the Asia category). The advanced and emerging economy classifications are provided by Morningstar.
The Herfindahl-Hirschman Index (HHI) is a commonly used measure of market concentration. It is calculated by squaring the market share of each firm active in a given sector and then summing those terms. To analyse concentration in global corporate bond markets, the outstanding amount of debt of each company in the dataset is calculated. That is then divided by the total outstanding amount in the relevant market. The resulting share is squared. This is repeated for each company in the relevant group, after which all the terms are summed up. In general terms:
Where Outstanding amounti,s is the outstanding amount of firm i in sector s, Tot. outstandings is the total outstanding amount in that sector and N is the number of firms in the sector. “Sectors” here refer to the different groups used for analysis (e.g. non-financial companies in advanced economies).
The HHI can be presented either on a scale from 0 to 1 (if the market shares are given in decimal form) or 0 to 10 000 (if they are given as integers). Commonly used thresholds for what is considered a concentrated market have been established through regulatory guidelines and case law in the field of competition law, where the measure is often used to evaluate the effect that a merger would have on market competition. For example, in their merger guidelines the US Department of Justice and Federal Trade Commission (2023[47]) consider markets with a HHI above 0.1 to be concentrated (“moderately concentrated” if it is between 0.1 and 0.18 and “highly concentrated” if it is above 0.18). The merger guidelines use a 10 000-point scale which has here been converted to a 0-1 scale for comparability.
The syndicated loan figures presented in Chapter 2 are based on OECD calculations using deal-level data from LSEG. This database provides detailed information on each loan, including the borrower’s identity, nationality and sector, as well as the interest rate structure, maturity date and loan amount. The loan credit rating category is defined based on the following criteria:
Investment grade: Initial pricing up to 299 basis points above the base rate
Leveraged: Initial pricing between 300 and 399 basis points above the base rate
Highly leveraged: Initial pricing 400 basis points or more above the base rate
Only loans classified as "syndicated" or "club syndicate" are included in the analysis. Deals with maturities of less than 90 days are excluded. Annual data are based on the closing date, which is when the syndication on all levels/tiers has been signed and completed. Industry-level analyses follow LSEG’s Business Classification (TRBC), while country breakdowns are based on the borrower’s domicile. To account for inflation, issuance amounts originally recorded in USD were adjusted using the 2024 US Consumer Price Index (CPI).
The private credit figures presented in Chapter 2 are based on OECD calculations using deal-level and fund-level data from Preqin. This database contains detailed information on private credit deals including the year, the lenders’ identity, the volume, the sector and the lending strategy. It also includes information on funds’ exposure to private credit, including their assets under management, the sectors they lend to and the regional focus.
Assets under management are calculated at the end of a calendar year, with the exception of the datapoint for 2024 that is calculated at the end of June. The figures only consider closed-ended, unlisted private debt funds, which includes unlisted Business Development Companies (BDCs). Collateralised debt obligations (CDOs) are not included. Sectoral analyses follow Preqin’s internal taxonomy, while regional breakdowns are based on the borrowers’ country of domicile. Lending strategies follow internal classifications.
For the regional breakdowns, North America includes Bermuda, Canada, Cayman Islands, the United States and US Virgin Islands. Europe includes the EU27, Albania, Alderney, Andorra, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, the Faroe Islands, Georgia, Gibraltar, Greenland, Guernsey, Iceland, Isle of Man, Jersey, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, North Macedonia, Norway, Russia, San Marino, Serbia, Switzerland, Türkiye, the United Kingdom and Ukraine. Asia includes Afghanistan, Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Democratic People’s Republic of Korea, Fiji, Hong Kong (China), India, Indonesia, Japan, Kazakhstan, Kyrgyzstan, Lao People’s Democratic Republic, Macau (China), Malaysia, the Maldives, Mongolia, Myanmar, Nepal, Pakistan, the Philippines, Singapore, Korea, Sri Lanka, Chinese Taipei, Tajikistan, Thailand, Timor-Leste, Turkmenistan, Uzbekistan and Viet Nam.
To account for inflation, issuance amounts originally recorded in USD were adjusted using the 2024 US Consumer Price Index (CPI).
Mentions of different risk indicators in corporate disclosures refer to corporate filings and earnings call transcripts by companies included in the Russell 3000 (US), Euro STOXX 600 (Europe) and NIKKEI 225 (Japan) indices that are included in the Bloomberg Document Search database. Document types include annual, semi-annual and quarterly reports, 10-K, 10-Q, 8-K, 6-K, as well as earnings call transcripts, conference presentation calls, shareholder meeting calls and company presentations. The results are obtained through natural language processing built into the Bloomberg search function. Keywords shown in graphs are complemented with near or exact synonyms to expand results, such as “bond”, “credit” and “loan” for “debt” and “world political” and “geo political” for “geopolitical”.