Convertible Bond Market Boom: What’s Driving the Record Growth?

After a turbulent start to the year, convertible bonds are experiencing a remarkable resurgence. As of August 2025, the global convertible bond market reached a total value of $306 billion, surpassing the $300 billion mark for the first time since 2020. 

Driven by record issuance, increasing demand for hybrid financing, and broader participation across sectors, convertibles are cementing their place as a mainstream capital-raising tool for companies navigating today’s volatile macroeconomic environment.

Navigating Volatility: A Year of Challenges and Opportunities

The second quarter of 2025 brought significant disruption to global financial markets. In April 2025, sweeping U.S. tariffs—including a 10% baseline tax introduced on April 5—triggered market volatility, pushing equities lower and freezing convertible issuance.

But the slowdown didn’t last long. By May and June, convertible issuance roared back to life, supported by:

• A 90-day suspension of tariff hikes
• Temporary trade agreements with China and the UK
• A rally in the S&P 500
• Stabilized Treasury yields and narrowing credit spreads

With funding conditions improving and market sentiment recovering, issuers swiftly re-entered the market to take advantage of favorable conditions.

A Record Quarter: Global Issuance Surges

The recovery in Q2 was dramatic. According to a Numerix report on Q2 convertible issuance, 69 new deals raised approximately $50.7 billion in gross proceeds—representing a 26% year-over-year increase compared to the $37.6 billion issued during the same period in 2024. Q2 market highlights included: 

• Average deal size: $724 million, well above historical norms
• Redemptions: $30.5 billion, slightly down from $32.1 billion in 2024
• Issuance-to-redemption ratio: Improved, reflecting rising issuer confidence and strong investor demand

The strong momentum highlights that convertibles are no longer a niche financing tool—they’ve become a central part of corporate capital strategies.

U.S. Market Booms

In the U.S., issuance is accelerating at an extraordinary pace. North America remained the dominant driver of global convertible bond issuance in Q2 2025, leading both in deal volume and proceeds. According to Numerix convertible bond issuance data, the region accounted for 49 deals totaling nearly $37.9 billion—representing more than half of global issuance for the quarter.

This compares to Q2 2024, when North America’s convertible issuance was significantly lower, highlighting a substantial year-over-year acceleration. The average deal size in the region also climbed to approximately $773 million, well above historical norms, underscoring issuers’ growing reliance on convertibles for large-scale capital raising.

Europe, while smaller in total issuance, saw the fastest growth rate year-over-year, with volumes surging 231% from $1.6 billion in Q2 2024 to $5.3 billion in Q2 2025. Asia-Pacific followed with $6.2 billion raised across 10 deals, maintaining steady but moderate participation.

Sector Leaders: Technology and Consumer Names Drive Activity

Issuance has become increasingly diversified, but some sectors remain at the forefront:

• Information Technology: 20 deals raising $14.6 billion—driven by software, semiconductors, and cloud services
• Consumer Discretionary: 15 deals totaling $14.4 billion, led by e-commerce giants and major brand names
• Industrials & Utilities: Contributed a combined $11 billion
• Financials, Real Estate and Energy: Continued steady participation, underscoring convertibles’ growing appeal beyond high-growth tech

This breadth in sector participation demonstrates that convertibles are being used far more widely, particularly by firms balancing growth needs with equity-preservation strategies.

Rise of the Megadeal

One of the most notable trends of 2025 is the surge in large-scale convertible issuances. In the first half of 2025 alone, 17 deals exceeded $1 billion—a dramatic increase compared to just seven megadeals in all of 2024.

This structural shift signals that convertibles are evolving into a mainstream capital markets solution, as issuers take advantage of favorable pricing dynamics with lower coupons compared to straight debt, benefit from reduced dilution through flexible conversion features, and tap into growing investor appetite as institutions become increasingly comfortable with hybrid assets.

Why Investors Are Leaning In

For investors, convertibles offer a unique payoff profile characterized by:

• Equity Upside: Participation in stock gains
• Downside Protection: Fixed-income characteristics provide a cushion during volatility

This dual nature has proven valuable during turbulent periods. For example, when tariff-driven market volatility sent global equities down 11%, convertible bonds declined only about 4.5%—demonstrating their resilience.

As macroeconomic uncertainty persists, many institutional investors are reallocating to convertibles to balance risk and return in diversified portfolios.

Favorable Pricing Dynamics

Q2 also highlighted a pricing sweet spot for convertibles:

• Elevated interest rates made hybrid financing attractive
• Equity markets stabilized, improving conversion dynamics
• Strong investor demand allowed issuers to raise capital on more favorable terms than traditional debt

This environment enabled companies to secure financing at lower coupons while retaining upside potential, fueling continued growth in the market.

Balancing Risks with Rewards

The convertible bond market’s resurgence highlights its evolving role in today’s capital markets. Issuers are leveraging convertibles for cost-effective, flexible financing, while investors are increasingly drawn to their balanced risk-return profile.

With issuance reaching record highs, broadening across regions and sectors, and institutional adoption accelerating, convertibles are firmly positioned as a mainstream financing tool in an era defined by volatility, innovation, and opportunity.

Confidence in Convertibles Trading

As the convertible bond market continues to expand and evolve, having the right tools to analyze opportunities and manage risk is more critical than ever. That’s where Numerix's Kynex empowers market participants to stay ahead.

Numerix’s Kynex is the market-standard platform for pricing, trading, and managing risk of convertible securities, trusted by leading global hedge funds, investment banks, and asset managers worldwide. 

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