Corporations are expected to borrow more money than ever in 2026

January is typically a busy month for companies borrowing money by selling bonds, and this January is shaping up to be one of the busiest yet.

Corporate debt issuance is expected to hit a record in 2026. That is despite all of the uncertainty in this economy and the fact that interest rates, while they have been falling, are still higher than they were just a few years ago.

The last time corporations piled on a lot of debt was in the wake of the pandemic. Maureen O’Connor, global head of high grade debt syndicate at Wells Fargo, said that’s because borrowing money was cheap back then.

“When you think about it from just a cost of debt capital perspective, 2020 and 2021 were very low interest rate years,” she said.

O’Connor said much of that debt is about to expire this year.

“They need to refinance their debt,” she said. “That’s probably the primary driver of supply.”

O’Connor said another reason companies are borrowing so much money is that many of them hope to purchase other firms this year, and companies often use debt to finance mergers and acquisitions.

“So we’re calling for debt-financed M&A volumes to be up pretty significantly on a year-over-year basis, call it somewhere around 25% or so,” she said.

There’s also all of the artificial intelligence infrastructure that tech firms are building around the country, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

“Big tech companies are going to be having massive capital expenditure needs this year, and one thing that they’re gonna need to fund that is debt issuance,” LeBas said.

LeBas said those capital expenditures pay contractors, suppliers, and other companies that have been issuing new debt of their own.

“That includes a handful of, for example, heavy equipment manufacturers, because they’re contributing to this massive [capital expenditures] expansion that’s being used for things like data centers across the country,” LeBas said.

Companies also feel like they can issue bonds right now because investors are eager to buy them. Randy Vogel, head of fixed income at Wilmington Trust, said that is, in large part, because investors expect big corporations to do well this year.

“Balance sheets are pretty strong, the economy is expected to grow, and the Fed is expected to cut rates,” Vogel said.

That said, economic growth could slow down this year or the Federal Reserve might hold off on rate cuts if inflation were to pick up.

If any of that happens, Vogel said, “the additional yield that investors would require to buy corporate debt would make it more expensive for corporations to fund themselves, therefore leading to a decline in issuance.”

In other words, the amount of bonds that corporations are issuing is a gauge that shows how the broader economy is doing.