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    Relative size of bond markets

    Given the explosion of debt across the developed and emerging markets over the decades, the primary and secondary market for buyers and sellers wishing to trade this debt is enormous. The sheer scale of this market is dramatically seen in the size of the debt market in the US.

    The US debt market is the biggest in the world, but when compared to the local SA bond market the disparity is disproportionally magnified.

    The nominal value of local debt is R827 billion as at the end of March follows. Over the last 2 years at least the total value of debt outstanding has not risen dramatically.

    From a purely government perspective, debt as a function of the country’s GDP has steadily been falling.

    Source : Bond Exchange

    Half of the total issued debt in South Africa is direct government at R436 billion with state owned enterprises comprising another R85 billion. The balance is banks, securitised paper, corporates, commercial paper and water authorities.

    This total market value in US dollar terms is approximately $110 billion.

    This pales into insignificance when one looks at just the new issuance in the US debt markets for the first half of 2009 – i.e. just the value of new debt issued in 6 months.

    According to the US Securities Industry and Financial Markets Association, total new issuance in the first half of 2009 came in at $3,42 trillion (this includes new equity issuance of $124 billion), up from $3,01 trillion in the first half of 2008.

    The US government was a big net borrower, with Treasury raising $860 billion and Federal Agencies a further $704 billion.

    Mortgage backed security issuance came in at just over $1 trillion for the first half of 2009.

    With Lehman’s collapsing exactly one year back, new issuance collapsed in Q3 and Q4 of 2008 coming in at “just” $1,7 trillion for these 2 quarters.

    Years of new debt being issued has brought the size of the total outstanding US bond market debt to a phenomenal $34,2 trillion at the end of March 2009. This is some 311 times the size of the total outstanding debt that SA has .

    In 1996 this total outstanding debt across the US government, municipalities, corporates, asset backed and Federal Agencies was $12,2 trillion and so has almost trebled in the 12/13 years.

    The big question is where are the global net savings required to lend to these borrowers?


    Ian de Lange
    021 9144 966

    Permalink2009-09-15, 18:05:27, by ian Email , Leave a comment
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