Global corporate junk bond issuance hit an all-time high in 2013, led by a surge in Europe, as corporates sought to take advantage of cheap borrowing costs and amid increased demand for the region's assets among global investors.
Speculative-grade debt volume totaled $476.5 billion in 2013, the highest on record, and marking a 12 percent increase from 2012, according to data provider Dealogic.
In Europe, high-yield volume rose 54 percent on-year to $121.9 billion - a contrast from the U.S., where issuance fell 6 percent to $259.5 billion from a record $274.8 billion in the previous year. Together, both regions accounted for 80 percent of global speculative-grade debt volume.
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Junk debt refers to bonds that carry a rating of 'BB' or lower from Standard & Poor's or 'Ba' or and below from Moody's. They have a higher risk of default compared to investment-grade debt but give a better return for investors as yields are higher.
Manpreet Gill, head of fixed income currencies and commodities (FICC) investment strategy, Standard Chartered Bank says the overall rise in global junk bond issuance was driven by the low interest rate environment and a growing realization that the borrowing rates could rise in the foreseeable future.
Gill notes robust high yield issuance will continue into 2014 as the incentives for corporates to raise capital from the debt market remain in place and liquidity conditions stay favorable.
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"Tapering by itself should not impact issuance. The [Federal Reserve] is still ingesting money into the economy, but just at a slower pace, and they combined it with a fair amount of guidance for short-term rates to remain low. That should be positive," he added.
Europe to remain a bright spot
The euro zone's stabilizing economic growth and accommodative monetary policy will support strong issuance in 2014, according to Fitch Ratings.
"The pipeline for European high yield issuance in 2014 remains strong as the low-yield environment tempts many legacy issuers with approaching call dates to refinance at lower current coupons," Fitch wrote in a report on Thursday.
Additionally, as European banks actively seek to improve capital profiles by reducing exposure to capital-intensive corporates, this will further promote a shift away from bank loans towards bond issuance.
(Read more: Junk bondissuance in Europe reaches record in 2013)
Fitch estimates corporate lending may drop by as much as 400 billion euros through 2019 as Basel III is implemented in Europe. Under Basel III guidelines, most banks will be forced to triple the amount of basic capital they hold in a bid to avoid future taxpayer bailouts.
—By CNBC's Ansuya Harjani; Follow her on Twitter: @Ansuya_H