- New issue activity in Q3 totaled $32.7 billion, bringing total issuance volume for 2025 to $86.4 billion. Issuance volumes have surged in 2025 and are on track to surpass the record levels seen in 2020-21, driven by robust investor demand and roaring equity markets.
- After a volatile first half, the convertible bond market entered Q3 with renewed confidence – buoyed by equity strength, shifting rate expectations, and elevated issuance activity. The market backdrop strongly favored issuers, as tight credit spreads and investor risk appetite led to the most issuer-friendly average terms in over 4 years. Approximately one-third of all deals in the quarter priced with a zero coupon.
- While the technology sector continues to anchor the market, Q3 saw over $10 billion of issuance from non-traditional sectors, including first-time issuers in the Industrials, Real Estate, and Energy sectors. The broadening issuer base highlights the appeal of convertibles as a hybrid instrument, allowing issuers to achieve lower yields than they would in fixed-income markets.
- Refinancing activity continues to be the predominant theme driving issuance volumes, with exactly half of all deals raising proceeds to pay down existing debt. Concurrently, we have also seen a pick-up in opportunistic issuance to fund growth initiatives and strategic transactions. The thematic tilt has been underpinned by a raising share of issuance from companies in the AI-infrastructure space.
The proliferation of deal activity in Q3 saw issuance come from several different sectors, but the technology sector continues to anchor the market, contributing to over 45% of total volume over the last 6 months. Notably, Q3 saw a broadening of the issuer base from a handful of non-traditional sectors, including first-time issuers in the Industrials, Energy, and Real Estate sectors.
Terms: Issuers in Q3 benefited from favorable market dynamics, as a combination of tight credit spreads and lower treasury yields, elevated volatility, and soaring equity markets allowed issuers to achieve historically attractive pricing terms. The average new issue terms for companies in the technology sector were at their most favorable since 2021 (despite a higher risk-free rate), and a growing share of all issuers continue to achieve zero-coupon deals – remarkably, over 40% of all new issue volume this year carries a 0% coupon.
Average Convertible Debt New Issue Coupon Rate and Conversion Premium 2022 – 2025
| Sector | 2022 | 2023 | 2024 | H1 2025 | Q3 2025 |
|---|---|---|---|---|---|
|
All Deals |
3.45% / 29% |
3.50% / 30% |
2.62% / 31% |
1.90% / 34% |
1.95% / 33% |
|
Technology Sector |
2.68% / 31% |
2.80% / 27% |
1.86% / 34% |
1.20% / 37% |
0.83% / 36% |
|
Healthcare Sector |
3.08% / 30% |
2.56% / 30% |
2.69% / 31% |
1.88% / 34% |
2.18% / 37% |
|
Average 5y UST |
3.00% |
4.06% |
4.13% |
4.11% |
3.85% |
Pricing Results vs. Price Talk: Pricing outcomes in Q3 strongly favored issuers, with over 60% of all deals in the quarter pricing better than the midpoint of the range, while 12% priced worse than the midpoint. Pricing dynamics shifted distinctly in favor of issuers as the quarter progressed, with 90% of all deals in September achieving a midpoint or better outcome, despite that being the busiest month of the year with 30 deals. Issuers pushed the market on aggressive launch ranges to achieve their desired pricing outcomes – of the 17 zero-coupon deals in Q3, 10 issuers launched with a fixed 0% coupon to maximize their chances of achieving this goal.
Secondary Trading: The convertible asset class delivered strong absolute performance in Q3, outperforming fixed-income instruments and closely tracking equity upside. We estimate that average Q3 returns for outright funds were in the double-digits, while returns for convertible arbitrage funds were lower but still in positive territory. Valuations in the convertible secondary market have richened further in Q3, driven by compressed credit spreads and lower benchmark yields through the quarter.
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