Corporate Bonds poised to surge as Fed rate cut unleashes new demand

Corporate bonds are set to rally alongside equities this week as the Federal Reserve is expected to deliver its widely anticipated rate cut, creating a “powerful tailwind for credit markets that have already attracted record inflows in 2025.”

This is the bullish analysis from Nigel Green, chief executive of global financial advisory giant deVere Group ahead of the divided Federal Reserve likely to make its first interest rate cut this year on Wednesday.

The CEO says investors are underestimating how dramatically lower borrowing costs will fuel demand for high-quality corporate debt.

“Markets have spent months pricing in equity upside, but the real story now is in credit,” he notes.

“With policy easing finally arriving, yields on investment-grade bonds become even more compelling relative to cash, while the probability of defaults remains contained.”

Data compiled by Bloomberg show US investment-grade corporate bond issuance has topped $1.2 trillion year-to-date, on track to eclipse the 2020 record.

Average yields for top-rated issuers have slipped toward 5.1% from more than 6% at the start of the year, even before the Fed’s move.

According to EPFR, global corporate bond funds have seen nearly $90 billion of net inflows in 2025, the strongest start to a year since the data series began.

“The Fed’s action cuts the cost of capital immediately, but it also signals that it will not allow a credit crunch to derail growth,” says Nigel Green.

“For corporations with solid balance sheets, that means cheaper refinancing and room to extend maturities. For investors, it means a rare opportunity to lock in attractive real yields before spreads compress further.”

The macro backdrop adds urgency. US core inflation has slowed to 2.3% on a year-over-year basis, the softest since early 2021, while second-quarter GDP growth came in at 2.1%, showing steady expansion without overheating.

“We’re entering a sweet spot where inflation is easing, growth is steady, and the central bank is supportive,” explains the deVere chief executive.

“This combination historically delivers outperformance for corporate credit relative to equities.”

Investment banks report that US companies are preparing to flood the market with new offerings in the weeks ahead to capitalize on lower rates.

Issuers from tech giants to utilities are lining up multibillion-dollar deals, and order books are already oversubscribed.

Nigel Green comments: “We’re witnessing a rush by corporates to secure funding at lower coupons, and that momentum is self-reinforcing.

“The secondary market benefits as every new deal brings more investors into the space.”

The appeal is not confined to the US. European and Asian corporate bond markets are drawing increased attention as central banks from the Bank of England to the Bank of Japan maintain or expand their own easing cycles.

“This is a global credit moment,” Nigel Green observes. “Dollar, euro, and sterling issuers all stand to gain as investors search for yield in stable names.”

The deVere chief cautions that complacency is not an option. “When spreads tighten sharply, the easy money will be gone,” he warns.

“Investors who act early, while yields remain attractive, are positioning themselves for a multi-quarter credit rally.”

He concludes: “This week’s cut is more than a headline for Wall Street; it’s the starting gun for what we expect to be a broad and sustained resurgence in global corporate credit.”