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Corporate Bond Markets Rohini Tendulkar
Economist
IOSCO Research Department
• Growing in size and importance
• Increasingly international
• Searching for some yield
• The transformation of secondary markets
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Themes
Importance of Corporate Bond Markets
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For non-financial corp bonds outstanding, growth has been steady
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Amount Outstanding, US$
*Data source: BIS, AsianBondsOnline, IMF
Financial
Non-financial
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Bank credit, Non-financial Corporate Bond, Non-financial
*Source: BIS and ABO
…while in some major economies, bank credit to non-financials is shrinking
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Infrastructure bond issuances
*Source: Dealogic
Corporate bond markets are being tapped into for long-term financing, such as infrastructure financing…
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Real-estate/property developers - issuances
*Data source: Dealogic
… also at the global level, real-estate and property developers (incl. REITs) are turning to corporate bond markets.
Emerging
Markets
Developed
Markets
International nature
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Corporate bond market activity is spreading globally, with emerging market issuances making up a growing proportion…
9 *Data source: IOSCO Research Department, data sourced from Dealogic
No data
<10
10 - 200
200 - 400
400 - 600
600 - 800
800 - 1000
1000 - 2000
2000 - 3000
>3000
Source: IOSCO Research
Corp Bonds Iss.
in $US Billions
Global heat map of total issuances between 2007
and 2013
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High Yield vs Investment Grade issuances, issuance volume
*Data source: Dealogic
High yield bond issuances have increased in developed markets since the onset of the crisis but not so much in emerging markets.
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Issuances for refinancing purposes
*Data source: Dealogic
After 2008/2009 bonds issued for refinancing purposes jumped but growth has been flat since.
Developed Mkts,
Refinancing
Emerging Mkts,
Refinancing
An increasing number of emerging market issuances are putable…
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Putable bond issuances, volume
*Data source: Dealogic
Emerging
Markets
Developed
Markets
Secondary Markets Transformation
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Shrinking dealer inventories…
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Dealer inventories, bond turnover ratio
*Source: SIFMA, NYFR
Disentangling phantom liquidity
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CDO, ABS issuances and dealer inventories
*Source: Dealogic, NYFRB
Phantom liquidity: liquidity provided to the market on the back of
potentially systemically risk practices.
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Credit Risk
Interest Rate Risk
Call Risk
Liquidity Risk
Yield
Bond Issue Investor Dealer Structured
Debt Issue
Liquidity Risk Liquidity Risk
Financial
System
Primary
Market
Secondary
Market
Structured
Markets
Bond Issue Investor Dealer
Liquidity Risk
Financial
System
Credit Risk
Interest Rate Risk
Call Risk
Liquidity Risk
Yield
Bond Issue Investor Financial
System
Credit Risk
Interest Rate Risk
Call Risk
Liquidity Risk
Yield
Pre-crisis
Post-crisis
Adjustment
Investor Confidence Issues
Systemic Risk
Financing Issues
Dealer
1. Does standardisation of bond issuances increase efficiency? 2. How can and should technology transform corporate bond markets?
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Rohini Tendulkar
Economist
IOSCO Research Department
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