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The development of the bond market in Europe

Author: Anonymous From: www.yourpaper.net Posted: 2009-04-01 02:42:08 Read:
Abstract: The euro area financial system is bank-led recent years, however, the financial markets, especially bond markets of the euro zone, or a prominent changes. European government bond markets, the private sector bond market, the market for credit derivatives, asset-backed securities market and other neighboring markets have seen significant development. One of the first and development of the financial markets has important significance for the promotion of the conduction of monetary policy within the euro zone to promote economic growth in the euro area, and to promote the formation of optimal currency area in Europe.
Keywords: bond market, the market for credit derivatives, asset-backed securities
A European market part, especially the development of the bond market
Continental Europe's financial system, compared with the United States the most prominent difference is: the European system is bank-led, and the Anglo-American system is based on market-oriented. The data show that by the end of 2005, the euro zone stock of bank loans of about 110% of GDP, while the U.S. ratio of less than 60%. Correspondingly, euro zone bonds a total of about 150% of GDP, the United States is about 170%. In the stock market, the euro zone is more obvious, the total amount of shares in the United States is about 120% of GDP, the ratio of the euro area of ??55%.
Even banks role in the transfer of resources from the surplus sector to the deficit sector process is still higher than the market in recent years, the financial markets in the euro area is still huge. This trend in the bond market was particularly conspicuous. Due to the strong growth of the private sector, the balance of the securities denominated in euros, up from 5.708 trillion euros in January 1999 to 9.264 trillion euros in early 2006, a total of seven rose 62%, with an average annual growth rate of 8%.
Financing of non-financial enterprises, however, still tend to banks: for example, the financing of non-financial corporations in the euro area in 2005 to extend and strengthen the trend since 2003, 80% of the financing comes from bank loans and the rest from bonds and stocks average sharing.
However, banks in the euro area non-financial corporate finance dominates this conclusion also need two points illustrate. First, the financial sector statistics on non-monetary financial enterprises "category, the non-financial corporate finance data are not be included. Secondly, since the advent of the euro in 1999, the rapid development of securitization in Europe. The The cash securitization phenomenon in Europe, but also the development of the other - the larger scale of the phenomenon, namely securitization. Consolidated securitization, the loan itself is still in the balance sheet of the commercial banks, the risk is transferred to investors through derivatives contracts. In addition, Since securitization opaque characteristics, official data is difficult to fully reflect its effects and its contribution to the development of the bond market.

Even taking into account these conditions, the euro area financial system dominated by the banks of this feature is still established. Underestimate the significant development of the market, especially the bond market, the quantity and quality, is not desirable. I think that the five areas of development which is particularly important.
After the advent of the euro, the first significant change is the integrated development of the bond market. In Europe, the standard deviation of the bond yields different issue issue once existed a difference of 150-300 basis points. With the approaching of the monetary union, this difference gradually reduced to the relatively low level of about 10 basis points by the end of 1998, and remained ever since. The level and volatility of bond yield similarity clearly reflects the high degree of market integration. Observation Beta convergence "phenomenon can be further confirmed. Beta measure the degree of convergence of different issue issue bond yield movements, in 1998 this number reached 1 (Greece in 2001 reached 1, therefore defer to join the euro), which means that changes in the yield completely interrelated.
Bond market development is the significant growth of the private sector bond market and the gradual integration, covering financial companies, including banks and non-financial enterprises. After the advent of the euro, about 2/3 of the amount of euro-denominated bonds issued for private sector bonds, the Treasury share only a little more than 1/3.
The growth of the private sector bond market is mainly due to the non-bank financial enterprises. Since 1999, euro-denominated securities issued by financial enterprises balance rapid growth with an average annual rate of 29.5%. In wider terms, the average growth rate of the balance of euro-denominated securities issued by banks declined, but still very impressive, reaching 7.3% per annum. The issue of the volatility of the non-financial enterprises, but the average annual growth rate reached a high of 10.4%. Contrast, the balance of government bonds grew by only 4.3% since 1999.
Another highlight is the development of the corporate debt market in addition to the growth in the number of its integration process. In fact, the bonds issued in different countries, if they have a similar rating and other fundamentals characteristics, they yield very similar As for the specific country in which the issue of the financing costs of debt issuance enterprises have little effect.
3. Promote the development of the corporate debt market in Europe and its an interesting progress of the integration process is the development of the credit derivatives market. In fact, it is the market in real enterprise risk pricing. The problems of the credit derivatives market is not transparent enough. The same time, the determination of the size of the market with strong uncertainty: In the past few years, it is estimated that the growth rate of more than 80% of the market, according to Fitch Ratings (Fitch) global credit derivatives survey data, 2004 The total size of the market at the end of $ 5.3 trillion.
4 is similar to the phenomenon on the credit derivatives market is the development of the asset-backed securities (ABS). Lack of asset-backed securities market transparency makes it difficult to accurately determine its size. This situation is particularly evident for the consolidated securitization, in the process, the bank did not sell the loans, but rather transferred its inherent risks. In fact, we can only estimate the cash securitization market scale: its the consolidated securitization market was not as important in Europe, before the advent of the euro in 1998, almost non-existent, but since then it has developed rapidly. European Securitization Forum Statistics show that from 1998 to 2005, circulation has doubled seven times, more than 300 billion in 2005. The overall balance is estimated between 7000-800000000000.
5 four surrounding market development of the bond market. Any financial market, the bond market is also a positive interaction with neighboring markets. The four market is important in this regard: the repo market, the interest rate swaps market, the bond futures market and the commercial paper market.
Eight years since the advent of the euro, the repo market on the scale and the integration process has made leaps and bounds. In December 2005, ICMA a recent survey of the European repo market, the repurchase market size at least about 6 trillion euros, an increase of about 15% over the previous year.
Euro interest rate swaps market is the world's largest swap market. According to the statistics of the Bank for International Settlements, the total market value of the euro OTC interest rate swap market reached $ 3.7 trillion, while the corresponding dollar market size was only 1.8 trillion.
Treasury bond futures market is concentrated in the Exchange, in particular, the Euronext (Eurex), the total market is greater than the sum of the contract of national currencies before the advent of the euro government bonds, which also vividly illustrates the euro is not just the countries whose place the sum of money.
Commercial paper market, so far, is a poor relation to the money market can only say: It is not only not commensurate in size with the euro-zone economy, with the U.S. market is not comparable, and both publishers and investors there are serious fragmented. However, I would also point out some positive aspects, although this is not so much the fact that, as it is a commitment, but also with the private sector in the support of the European Central Bank and the Eurosystem has launched aimed at improving its market function some of the initiatives. Our goal is to create a more unified, more developed markets, so the supplement of the bond market in the short-term market for publishers and investors.

, The integration of the financial system to the development of macroeconomic significance
First, financial integration can improve the conduction of monetary policy in the entire euro zone. Changes in monetary policy from the central bank are transmitted to the real economy, the most important conduction channel is interest rates: the central bank to change the short-term interest rates, this adjustment conduction to the entire structure of interest rates. An area for such a complex similar to the euro zone, a particular problem, changes in interest rates independent homogeneously spread throughout the region, or a specific interest rate changes in policy will produce the effects of different aging degree. In this regard, the integration of the financial system is particularly important: the higher the degree of integration of the financial system, the greater convergence of the conduction of monetary policy in the euro area as a whole, the same changes in monetary policy to bring different effects in different regions of the euro area the risk is smaller.
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