This is a magnificent illustration of what we discussed in Record Corporate Bond Issuance: Where Did All The Money Go? last October.
From Bloomberg Chart of the Day,
``European companies are turning to credit markets after losses stemming from the financial crisis left banks reluctant to lend, cutting off corporations from their primary source of financing, according to UBS AG.
``The CHART OF THE DAY shows the level of corporate bonds in the credit market, in blue, has risen 12 percent over the past year, and bank loans, in yellow, have fallen to the lowest in 13 months. While the euro-region economy returned to growth in the third quarter, banks may remain reluctant to lend for some time, boosting bond issuance further, said Stephane Deo, UBS chief European economist in London.
“One of the key reasons why banks remain cautious about lending are future economic prospects,” Deo said. “New debt now comes disproportionately from markets. This is a very unusual pattern.”
``In the euro area, bank lending accounts for about 70 percent of corporate financing compared with 20 percent in the U.S., according to the European Central Bank. Banks started tightening credit standards in the third quarter of 2007 as a result of the financial crisis, according to ECB statistics.
“Companies that have access to the credit market are better off compared to those that have no access,” Deo said."
Let me add- perhaps the proceeds from global QE programs have been helping boost the liquidity in the system in support of these record bond issuance.
This also implies that a cut in QE would probably negatively impact on the bond markets unless lending from the banking system recovers.
From Bloomberg Chart of the Day,
``European companies are turning to credit markets after losses stemming from the financial crisis left banks reluctant to lend, cutting off corporations from their primary source of financing, according to UBS AG.
``The CHART OF THE DAY shows the level of corporate bonds in the credit market, in blue, has risen 12 percent over the past year, and bank loans, in yellow, have fallen to the lowest in 13 months. While the euro-region economy returned to growth in the third quarter, banks may remain reluctant to lend for some time, boosting bond issuance further, said Stephane Deo, UBS chief European economist in London.
“One of the key reasons why banks remain cautious about lending are future economic prospects,” Deo said. “New debt now comes disproportionately from markets. This is a very unusual pattern.”
``In the euro area, bank lending accounts for about 70 percent of corporate financing compared with 20 percent in the U.S., according to the European Central Bank. Banks started tightening credit standards in the third quarter of 2007 as a result of the financial crisis, according to ECB statistics.
“Companies that have access to the credit market are better off compared to those that have no access,” Deo said."
Let me add- perhaps the proceeds from global QE programs have been helping boost the liquidity in the system in support of these record bond issuance.
This also implies that a cut in QE would probably negatively impact on the bond markets unless lending from the banking system recovers.
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