• COVID-19 bond issuances are on the rise
  • Market could grow to $108 billion by year-end
  • Bank of America became first bank to issue COVID bond

Like green and social bonds, coronavirus bonds have emerged as a new way to make a difference with investments. As of April 28, bonds sold by government and companies to fight the virus and its impact were worth about $65 billion, according to AXA Investment Managers. The COVID-19 bond market could grow to $108 billion by the end of the year if current issuance rates continue, said the asset manager in a note.

Sovereign, Supranational and Agency (SSA) borrowers were 90% of issuers in the market with corporates making up the remaining 10%. Financial institutions are expected to pick up as hurdles are lifted. An example of this is the International Capital Market Association stating that government-guaranteed loans can be included in COVID-19 bonds issued by banks.

"We see the nascent COVID-19 bonds market as a new area for impactful debt issuance, with similarities to green and social bonds. We believe these bonds can help to address the current and future societal challenges of the pandemic," wrote Axa analysts Théo Kotula and Marie Fromaget.

Covid 19 bonds
Source: AXA Investment Manager.

Social bond issuance reached a record $11.9 billion in the first quarter, more than double the previous quarterly record, according to Moody's Investors Service. It said the surge in social and sustainability bonds has been primarily led by multilateral development banks, which have increasingly turned to these instruments to finance their coronavirus response efforts. "Greater emphasis on social finance and sustainable development will likely be one of the lasting outcomes of the coronavirus crisis," said Matthew Kuchtyak, AVP-Analyst at Moody's.

Yesterday, Bank of America issued a $1 billion coronavirus bond, the first from a U.S. bank, with the proceeds supporting not for profit hospitals, skilled nursing facilities, and health care equipment and supplies players.