It was supposed to be the silver lining to a year of brutal losses. As bond-fund managers watched the market value of their portfolio decline rate hike after rate hike, one thing was certain: companies would soon have to return to the market offering juicier yields.

But for all the yield concessions companies have had to offer investors to raise new debt this year, it's proved to be of little comfort, a Bloomberg analysis of bond issuance data shows.

Of the 1,555 investment-grade bonds worth over US$1.3 trillion that have been sold in the U.S. and Europe since Russia's invasion of Ukraine, all but 137 are now trading below their offering price, the data show. It totals up to paper losses of nearly US$106 billion for investors so far.

“It highlights, once again, the need for investor discipline around deal pricing,” said Maria Staeheli, a senior portfolio manager at Fisch Asset Management. “Recently we have observed a tendency of investors to accept less attractive pricing even on some of the spicier names. We think that's related to investors fearing they miss out on bear market rallies.”

For some deals, the price drops are so severe that the notes are now trading at what some investors consider to be distressed levels. A sterling-denominated social bond sold by bLend Funding Plc in April has fallen to 72 pence from an issue price of par, while in the U.S. market, a US$7 billion 30 year bond sold in March by a unit of AT&T Inc. and Discovery Inc. has slumped to about 69 cents. A JAB Holdings B.V. bond priced in April has lost over a third of its value to 59 cents.

Bonds sold before Russia's invasion of Ukraine in late February have suffered the most. The 480 notes priced in January and February have dropped by an average of 17 per cent, with total losses at around US$64 billion, the data show.

More recent offerings haven't been immune to the disruption that's swept global markets. Nearly two-thirds of the 336 investment-grade bonds sold in September and October for which full pricing information is available are already quoted lower than the price they originally sold for, Bloomberg analysis shows.

It's a grim picture for investors who would typically look to trade out of their existing holdings when a company comes to the market with a new deal. With global financial markets still volatile as central banks fight consumer price inflation and recession risks, conditions are unlikely to improve any time soon. Those firms that need to raise financing are also now facing ever-higher borrowing costs on the public debt markets, as average dollar, euro and sterling high-grade corporate yields have surged this year.

“The weakness is all ultimately being driven by inflation, so we need to get conviction that it's rolling over for the market to turn around,” said Gordon Shannon, a portfolio manager at TwentyFour Asset Management. “Given how volatile it has been, how long it's gone on, I think that means really compelling evidence. A single down print on CPI won't be enough.”

A handful of deals have kept afloat though. A selection of last week's offerings from borrowers including Northumbrian Water Ltd and TenneT Holding BV in Europe and Lockheed Martin Corp. and British American Tobacco Plc in the US have benefited from a bond rally to edge higher.

U.S. Treasury yields on Monday hit fresh highs not seen since 2008, adding to the pain for corporates who've issued this year. But it's not all doom and gloom. The rate shock is leading to much more attractive entry points for investors with longer term time-frames, and creating a better environment for bond picking.

The question for investors, as valuations start to look much more attractive, is when the bleeding from rates will stop.

“These kinds of losses have been painful, but current bond yields present some value,” said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors. “You've got to pick your spots and your issuers who can ride out a tougher economic scenario. The good news is if you're an IG investor, those companies are designed to do that.”

Elsewhere in credit markets:

Americas

• Elon Musk is the new owner of Twitter Inc., ending months of uncertainty. With the US$44 billion deal now closed, a Morgan Stanley-led cohort that provided about US$13 billion of debt financing to help fund the acquisition of Twitter is now saddled with risky loans that they never intended to keep on their books. 
• A heap of distressed debt is expanding in the U.S. market and investors worry that a burst of defaults will follow.The amount of dollar-denominated bonds and loans trading at levels indicating distress is the largest since September 2020, reaching US$271.3 billion last week, according to data compiled by Bloomberg.
• There's one issuer considering a US high-grade bond offering on Friday, according to an informal survey of debt underwriters, who declined to name the firm. The primary market has been fairly active, with a handful of new deals every day and 13 total borrowers in the week.
• Federal Reserve officials will maintain their resolutely hawkish stance next week, laying the groundwork for interest rates reaching 5 per cent by March 2023, moves that seem likely to lead to a U.S. and global recession, economists surveyed by Bloomberg said.

EMEA

• Friday brought one opportunistic deal to Europe's primary debt market, as issuers and investors watch economic data from across the major Eurozone countries while digesting the European Central Bank's latest rate hike.
• The singular deal from Honeywell International Inc is unlikely to be enough to boost the €17 billion of sales so far to in-line with expectations for the week
• Germany defied expectations by reporting another quarter of economic growth yet momentum slowed dramatically in France and Spain
• The increasing talk of a central bank pivot away from aggressive tightening could introduce an element of fear-of-missing-out in the already popular investment-grade corporate bond market
• U.K. lenders are facing the biggest mortgage test since the financial crisis, preparing for a wave of homeowners struggling to pay their mortgage bills after borrowing costs have tripled this year

Asia

• Credit risk gauges for junk and investment-grade dollar bonds in Asia ex-Japan reached the highest since at least 2011 this week after policy concerns in China and a shock default by a South Korean amusement park developer spooked investors, putting the region in the spotlight globally. 
• Asian junk bond spreads topped 1,580 basis points, a record, according to a Bloomberg index with data stretching back to 2010
• Meanwhile, China's offshore credit market is limping to the finish line for October, with both investment-grade and high-yield dollar bonds on track for historically weak monthly performances, with the yuan and stocks also down
• South Korea's financial institutions will start paying three trillion won (US$2.1 billion) into a fund to stabilize credit markets and state-run banks will curb bond issuance, according to a statement from the banking regulator
• China signaled a possible expansion of a key program to boost liquidity for real estate firms beset by an industry debt crisis, as distress mounts following record defaults
• The Bank of Japan stood by its ultra-low interest rates amid fresh government support, pushing back against lingering market speculation it will adjust policy as it continues to predict inflation will cool below two per cent next year