Global funding trends on the capital markets in 2014

Private-sector capital market funding returned to growth in 2014. The main sectors responsible were non-financial corporations (NFCs) and banks, both of which stepped up the rate at which they issued fixed-income instruments. The increase in the volume of debt issued by NFCs partly reflects the ongoing process of disintermediation, while bank issuance is largely related to compliance with the new regulatory framework. By contrast, as a result of the fiscal consolidation process under way in the main advanced economies, the public sector reduced its issuing activity on debt markets, although the reduction was smaller than in previous years. Issues did not progress uniformly over the course of the year, and varied across countries and market segments. The early part of 2014 was characterised by low volatility and a strong appetite for risk. During this period investors opted for a strategy of yield search, spurred on by a context of ample liquidity and low interest rates, which encouraged the issuance of securities in almost all segments and countries. However, in the summer the markets began to experience a series of upturns in volatility and yield search lost momentum. This favoured more secure issuers in detriment to those considered high-risk, such as high-yield NFCs or firms and sovereigns in emerging economies (hereafter EMEs). This article describes the main features of issuing activity in international markets in 2014, including both advanced and emerging economies, paying particular attention to debt instruments and the activity of NFCs and banks. It also analyses developments in alternative markets to fixed-income issues, such as equities, syndicated loans and structured financial markets. The analysis is mainly based on data obtained from Dealogic, which reports issues with maturities of eighteen months or more.