Although high yield bond markets in the US and Europe recorded small year-on-year declines in issuance in H1, high levels of activity in Q2 bode well for the rest of the year
After a slow start to the year beset by a shortfall in M&A activity and tariff-induced market uncertainty, US and European high yield bond issuance rallied in the second quarter and lifted markets as they entered the latter half of 2025. Meanwhile, APAC markets recorded strong year-on-year gains during the first half of the year, boosted by a busy first quarter.
In the US, high yield bond issuance in H1 2025 came in at US$123.9 billion, down 6% compared to the same period in 2024, when issuance totaled US$131.9 billion. However, issuance did make up lost ground toward the end of H1 2025, after markets recovered from early April’s initial “Liberation Day” tariff shock. Debtwire recorded issuance of US$32.4 billion in June—the highest monthly total since the peak of the market in 2021.
Europe’s high yield markets followed a similar pattern. While H1 issuance reached US$77.3 billion, this marked a decline of approximately 6% from the US$82.2 billion logged in H1 2024. But, as in the US, June proved to be an especially busy month, with bond issuance reaching its highest level on record at €29.7 billion (around US$35 billion), according to Debtwire.
Overall Issuance by value Q1 2024 – Q2 2025
Instrument type: High yield bonds Use of proceeds: All
Location: Western and Southern Europe and USA Sectors: All Sectors
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In the APAC (excl. Japan) region, issuance in H1 climbed by 47% year-on-year from US$7.3 billion in H1 2024 to US$10.7 billion. However, unlike in the US and Europe, this activity was front-loaded at the beginning of the year—82% of issuance was announced in the first quarter before the market slowed down in the second quarter as market players assessed the implications of potentially higher trade tariffs, among other things.
Credit quality drives US high yield
The rally in US high yield issuance was driven by investor appetite for high-quality issuers and senior secured terms to protect against downside risk.
According to Debtwire, senior secured bonds represented a large share of activity in June, accounting for more than two-thirds of issuance as issuers offered security when issuing bonds to lock in investor interest. Meanwhile, bonds rated double-B-minus or higher accounted for US$76.2 billion of the issuances during the first six months of 2025, accounting for 69% of overall US issuance in H1.
Primary US high yield markets have also benefitted from the relative stability of secondary high yield bond markets, where average yields came in at 6.8% at the end of June. That is narrower than prior to the April tariff announcement and the tightest level observed since 2022, although the gap between higher- and lower-rated bonds has widened, reflecting the premium placed on credit quality.
European markets track US trends
European high yield markets mirrored the trends observed in the US, with issuance dipping in April but rebounding in May and June. According to Debtwire, issuance in April was half that of the previous month, coming in at just €6.2 billion, before rebounding strongly in June with issuance of €29.7 billion. This marked June 2025 as the best month on record for European high yield bond issuance, although around three-quarters of this activity was related to refinancing. Meanwhile, M&A-related issuance remained low by historical standards, reaching just €2.6 billion in H1, accounting for around 3.3% of total issuance.
As in the US, issuance skewed toward higher-rated bonds amid broader market uncertainty, although single-B bonds were able to gain traction with investors. However, bonds with ratings below single-B, generated minimal activity.
Similar to the US, European high yield investors showed strong appetite for senior secured notes, as seen in larger high yield bond issuances. On June 18, FiberCop issued a €2.8 billion senior secured bond, the largest European bond issuance of the year to date.
Secondary European high yield bond markets also settled by the end of the second quarter after a shaky April, when prices saw a spike in volatility before settling back to pre-Liberation Day levels, with yields returning to 5.2%.
Strong first quarter boosts APAC numbers
The 47% year-on-year gain observed in APAC (excl. Japan) high yield markets during the first half of the year was largely attributable to a busy first quarter. Issuance in the first quarter reached US$8.8 billion, the highest level recorded since Q3 2022 (US$9.25 billion). However, that figure is still significantly behind the average level recorded between 2017-22 (US$21.2 billion per quarter) before the market started a sharp downturn, primarily due to the liquidity crisis in China’s real estate sector.
APAC bond issuers raising dollar debt seized the opportunity to launch bonds early in 2025, when yield premiums were low and dealmakers were eager to invest in Asian borrowers following a period of constrained supply emerging from the region, according to Bloomberg.
However, issuance in the second quarter dropped off to just US$1.9 billion, primarily due to the impact of the US’s tariff announcements in April. But even as lenders and investors navigate the uncertainties related to the US tariffs and other geopolitical and economic events in the region, APAC credit markets have proven resilient and continued to offer investors steady underlying fundamentals, according to asset manager PineBridge Investments, with Asian high yield markets posting robust returns of 4.05% during the first half of the year.
Asian high yield markets may also benefit as global investors move to diversify portfolios that may be overexposed to the US and take advantage of the declining default rates and resiliency of Asia’s high yield ecosystem.
While some uncertainty remains on the global level, activity during the first half of the year points to improving confidence in high yield markets, particularly where credit quality is strong. Momentum heading into the second half of 2025 indicates a solid deal pipeline in parts of the global market for the months to come, with favorable market conditions potentially facilitating increased M&A related issuances in H2 2025.
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