Euro Debt Crisis hastens development of Bond Capital Markets

Opportunities emerge in every crisis. Though I am not referring to political opportunities (ala Emmanuel Rahm)

The Euro debt crisis has been shifting funding dynamics of the Eurozone's corporate world from the banking sector to the corporate bond markets.

From the Henrik Art of Danske Research

A recent report by Fitch confirms that European companies are increasingly relying on bond markets for their financing as bank lending becomes less attractive. By the end of 2010, corporate bonds represented 73% of the EUR1.3trn in debt used by 161 large European companies examined by Fitch.

Going forward, the trend towards US-style funding, where debt capital markets are a more important source of corporate funding than traditional bank loans, is likely to continue. The ongoing fundamental and regulatory challenges for the European banks that translate into persistent higher funding and capital costs are the key reasons for this development. In this respect, investment grade blue-chip corporates have access to cheaper funding in the bond market than their peers in the financial sector. As such, the critical mass required for a company to go to the capital market is getting lower.

According to Fitch, the European bond market continues to broaden and deepen and thus the trend towards increased funding disintermediation is occurring across virtually all industries and rating categories. To illustrate this point, for the first time, the high yield companies in Fitch’s sample group ended a year (2010) with more bonds than bank loans.

Economically unsustainable institutional political platforms are being forcibly reconfigured by the markets.

The stranglehold of the central banking cartel financed and facilitated welfare state is in a process of erosion.