Looking for the long read?
Download ‘Record issuance is not a reason to buy everything’.
The convertible bond primary market is booming. Global issuance reached USD147bn across 210 deals in the first eight months of 2026, compared with USD160bn for the whole of 20251. If sustained through to year-end, the current run-rate would imply annual issuance of some USD220bn – higher than any previous annual level.
But record issuance is not, in itself, a reason to buy everything coming to market. The real question is what happens after these bonds begin trading.
Part of the reason the market has been able to absorb this year’s level of supply is the changing buyer base. Hedge funds now hold 68% of US convertible assets, up from a trough of around 25% in 2017, according to BofA data. In our view, the growth of price-sensitive convertible arbitrage capital has provided an important source of demand for new issuance. But the same data also points to a potential crowding risk: a holder base that supports liquidity on the way in can become more correlated when positions are unwound.
We looked at 717 convertible bonds issued globally since January 2023 and measured their performance over the six months after issuance. Across the four vintages, 35% of new issues were down after six months, 33% gained single digits and 32% gained more than 10%2. In other words, the market has grown rapidly, but outcomes remain highly dispersed.
What is particularly interesting is how differently the downside and upside behaved.
The proportion of bonds suffering losses of roughly 10% or more has been remarkably stable: 11% in 2023, 12% in 2024, 12% in 2025 and 9% so far for the 2026 vintage. That stability has persisted through a tightening cycle, a pause and then a shift towards rate cuts, as well as changes in the issuer base and two separate equity drawdowns.
The upside has behaved very differently. The proportion of deals gaining more than 30% after six months has ranged from 3% to 21%. In our view, that contrast goes to the heart of the asset class: the convertible structure can help cushion downside as equity prices fall, but upside still has to be earned.
At the same time, the market investors are choosing from is changing.
The US remains the largest source of issuance, but its dominance has declined. The Americas represented 75% of global issuance in 2024 and 2025, compared with 61% so far this year3. Asia ex-Japan has moved in the other direction, rising from 9% of issuance in 2023 to 24% in 2026. Japan has also accelerated sharply as higher domestic rates have made convertible financing more attractive to a broader range of issuers.
AI is another important part of the shift. Around 35% of the FTSE global convertible universe by weight now sits somewhere in the AI infrastructure value chain, according to our mapping. But this is not simply exposure to the biggest technology companies. The largest deals reinforce the point: AI-related issuance is concentrated further down the infrastructure supply chain, in areas such as networking, hardware and power rather than among the hyperscalers or chipmakers themselves.
That change is also visible in what companies are doing with the proceeds. Capital expenditure accounted for 22% of issuance in 2026 to the end of August, up from just 5% in 2025, while refinancing fell from 25% to 17%4. It is the first time in the period we analysed that capex has overtaken refinancing.
This matters because financing new infrastructure is a different proposition from refinancing existing debt. A refinancing is primarily a credit question: can the company continue servicing its obligations? A capex-funded deal also requires investors to judge whether assets that have yet to be built will ultimately generate the expected returns.
Meanwhile, strong issuance does not necessarily mean investor-friendly terms. Half of new convertible deals in 2026 have priced with no coupon at all, up from 17% in 2023, while the average coupon has fallen from 2.9% to 1.8%5. Some of that reflects the higher equity volatility of today's issuer base, which increases the value of the embedded option, but strong demand for AI-linked paper has also shifted the balance back towards issuers.
None of this diminishes the opportunity in the primary market. Quite the opposite. Issuance is at record levels, the regional opportunity set is widening and companies are using convertibles to finance a new generation of infrastructure.
But scale and quality do not move together. In a market where post-issuance outcomes remain highly dispersed and half of new deals now pay no coupon, we believe selection matters more than simple participation. A record primary market creates more raw material. The job for investors is deciding which parts of it are worth owning.
1 Nomura, Mirabaud Asset Management, 31 August 2026
2 Bloomberg/Mirabaud Asset Management, 31 August 2026
3 Nomura, 31 August 2026
4 BofA Global Research/Mirabaud Asset Management, 31 August 2026
5 BofA Global Research/Mirabaud Asset Management, 31 August 2026
In brief
A record issuance year is creating more choice, not more certainty. Outcomes remain highly dispersed.
The buyer base has changed. Hedge funds now account for 68% of US convertible assets, helping absorb record supply but also introducing a potential crowding risk.
The downside has been relatively stable; the upside has not. Around a third of deals have lost money after six months, while the share delivering gains above 30% has varied sharply by vintage.
The opportunity set is broadening beyond the US. Asia ex-Japan and Japan are becoming more significant sources of new supply.
AI is reshaping where convertible capital is going. Around 35% of the global convertible universe now sits in the AI infrastructure value chain.
The use of proceeds is changing too. Investors increasingly need to assess execution risk as well as credit risk.
More supply puts a premium on selectivity. Half of 2026 new issues pay no coupon, reinforcing the need for managers to be selective about which deals they participate in.
IMPORTANT INFORMATION
The content on this page is intended for professional investors only and should not be relied upon by retail or private investors.
This publication is for information, education, and non-commercial purposes only. It is not suitable for readers who have no prior knowledge of financial markets. The views and opinions expressed are those of the named author(s) and may not necessarily represent views expressed or reflected in other Mirabaud communications.
It does not constitute an offer and is not intended to provide investment advice or investment recommendations. Any sectors, asset classes, securities, regions or countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell. This publication is not intended for and cannot be shared with any person who is a citizen or resident of any jurisdiction where the publication, distribution or use of the information contained herein would be subject to any restrictions.
Past performance does not predict future returns. All investment involves risks, including loss of the money invested. Diversification does not necessarily ensure a profit or protect against losses in declining markets. There is no guarantee that any particular asset allocation or mix of investments will meet given investment objectives or generate a given level of income. Exchange rate changes may cause the value of any cross-border investments to rise or fall. In general, investments in stocks and bonds are subject to risks such as country/regional risk, issuer, volatility and currency risk, which are not necessarily addressed herein. Do not base any investment decision on this publication alone.
This publication has been prepared without taking into consideration the objectives, financial situation or needs of any particular investor or type of investor. Neither the issuer nor its affiliates accept liability for any loss incurred in connection with the use of the information available in this publication. The sources used are deemed reliable. However, the accuracy or completeness of the information cannot be guaranteed, and some figures may only be estimates. Statements of facts, opinions, estimates, analysis or conclusions contained herein are provided in good faith and without obligation to update, revise or complete. They are subject to change without notice and may be revised at any time. This material may include projections, forecasts, and other forward-looking statements which are hypothetical in nature. They involve certain risks and uncertainties that could cause actual results to differ from those stated herein.
Mirabaud Asset Management (MAM), all rights reserved. Partial reproduction subject to proper quoting, full reproduction subject to MAM prior consent.
Continue to
