Corporate Bond Market Trends Emerging Risks and Monetary ...

Corporate Bond Market Trends, Emerging Risks and Monetary Policy

Corporate Bond Market Trends, Emerging Risks and Monetary Policy

Please cite this report as: ?elik, S., G. Demirta and M. Isaksson (2020), "Corporate Bond Market Trends, Emerging Risks and Monetary Policy", OECD Capital Market Series, Paris, corporate/Corporate-Bond-Market-Trends-Emerging-Risks-and-Monetary-Policy.htm

This report is part of the OECD Capital Market Series. More information about the series is available at: corporate/capital-markets Any questions and comments are welcome and should be addressed to: Mr. Mats Isaksson Head of Division Corporate Governance and Corporate Finance Division Directorate for Financial and Enterprise Affairs, OECD [Tel: +33 1 45 24 76 20 | Mats.Isaksson@]

This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ? OECD 2020

FOREWORD

By the end of 2019, the global outstanding stock of non-financial corporate bonds reached an all-time high of USD 13.5 trillion in real terms. This record amount is the result of an unprecedented build-up in corporate bond debt since 2008 and a further USD 2.1 trillion in borrowing by non-financial companies during 2019, in the wake of a return to more expansionary monetary policies early in the year. The new data in this report shows that, in comparison with previous credit cycles, today's stock of outstanding corporate bonds has lower overall rating quality, higher payback requirements, longer maturities and inferior investor protection.

This report presents:

recent developments and emerging risks in the corporate bond market

the use of rating-based investment and the holders of corporate bonds

credit rating methodologies and historical trends in rating changes

It builds on a dataset of more than 92 000 unique corporate bond issues by non-financial companies from 114 countries between 2000 and 2019. A description of data sources as well as the methodology for data collection are provided in the annex. The report builds on earlier work by the OECD Corporate Governance Committee on corporate finance and the development of more complete capital markets in the form of equity and long-term debt financing. The content and methodologies used in this report are provided as a basis for discussion with OECD committees and other experts about further work on corporate bonds as a source of market-based financing.

The report is part of the OECD Capital Market Series, which informs policy discussions on how capital markets can serve their important role to channel financial resources from households to productive investments in the real economy.

This report has been developed by Mats Isaksson, Head of the Corporate Governance and Corporate Finance Division of the OECD Directorate for Financial and Enterprise Affairs; Serdar ?elik, Senior Economist in the Corporate Governance and Corporate Finance Division, and G?l Demirta, Visiting Researcher from Sabanci University.

The authors are grateful to their OECD colleagues for valuable comments, in particular Juan Yermo, OECD Deputy Chief of Staff; Yoshiyuki Fukuda and Lukasz Rawdanowicz (Economics Department); and Adriana De La Cruz, Alejandra Medina, Tugba Mulazimoglu, Robert Patalano and Yun Tang (Directorate for Financial and Enterprise Affairs). Further thanks to Pamela Duffin (OECD) for excellent editorial support. G?l Demirta would like to thank the Swedish Corporate Governance Forum of the Karl-Adam Bonnier Foundation for its financial support for her work.

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