So asks Floyd Norris:
“At first glance, it appears that the answer is yes, at least for high-quality corporate borrowers. The volume of investment-grade corporate bonds issued in Europe and Asia in the first three months of this year was the highest ever for any quarter, while in the United States the total fell just short of the record.
But that glance is deceiving. Corporate bond markets around the world are functioning in large part because of government guarantees. Eight months ago, before the collapse of Lehman Brothers and the rescue of the American International Group, the idea of a government-guaranteed corporate bond would have seemed contrary to basic capitalist principles. Now, such bonds account for a substantial share of corporate bond issuance, generally by banks and other financial companies.”
The key is the chart — this one shows the volume of new bond issues and new syndicated bank loans, by quarter, going back to 2005, in the United States, Europe and Asia.
Chart courtesy of NYT, Thomson Reuters.
Are Credit Markets Reopening?
NYT, April 17, 2009
Banking Industry Showing Signs of a Recovery
NYT, April 16, 2009