Global debt markets surged to an estimated $100 trillion in mid-2013 from $70 trillion in mid-2007 as governments borrowed their way out of the financial crisis and companies sold record levels of bonds to take advantage of low interest rates.
The latest quarterly review from the Bank for International Settlements, said “active issuance by governments and non-financial corporations has lifted the share of domestically issued bonds, whereas more restrained activity by financial institutions has held back international issuance.”
The report said that given the massive expansion in public spending in recent years, governments globally — including central, state and local governments — have been the largest debt issuers.
Debt outstanding in these governments’ domestic markets reached $43 trillion in June 2013 – up about 80 percent from mid-2007.
“Debt issuance by non-financial corporates has grown at a similar rate, albeit from a lower base,” said the report.
“As with governments, non-financial corporations primarily issue domestically. As a result, amounts outstanding of non-financial corporate debt in domestic markets surpassed $10 trillion in mid-2013.
“The substitution of traditional bank loans with bond financing may have played a role, as did investors' appetite for assets offering a pickup to the ultra-low yields in major sovereign bond markets.”
The report said financial sector deleveraging after the financial crisis has been a main reason for slower growth of international compared to domestic debt markets. Financial companies have traditionally been the biggest sellers of bonds in international debt markets.
Debt sold by financial firms in the international market has grown by only 19 percent since mid-2007.