Debt issuance rebounded in Q2, reports BIS

Despite continued turmoil in financial markets, borrowing rose sharply in the international debt securities markets over the second quarter, reports the Bank for International Settlements’ (BIS) latest quarterly review.

Net issuance of bonds and notes increased to $1.07 trillion, up from $371 billion in the first quarter. The increase came chiefly from the euro-denominated bond segment, said BIS, where net issuance of $464 billion was more than four times the level of the previous quarter. BIS also noted mortgage-backed bond issuance rose, particularly in the UK after the Bank of England's April announcement of a special liquidity scheme that enables UK banks to swap illiquid assets, such as mortgage-backed securities, for gilts.

The quarterly report also stated trading on the international derivatives exchanges retreated in the second quarter of 2008. Total turnover based on notional amounts decreased to $600 trillion from the high of $692 trillion recorded in the first quarter.

BIS said most of the contraction came from derivatives on short-term interest rates, but turnover also declined in derivatives on long-term interest rates and stock indexes. By contrast, turnover in foreign exchange derivatives was up over the previous quarter's level and increased by as much as 44% year-on-year. Turnover in commodities derivatives (measured only in terms of the numbers of contracts) dropped, although year-on-year growth remained 37%.

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