Big spenders

24 December 2002

Investors worried about corporate investment should watch rising deficits closely. Slack demand for corporate bonds may compound the imperative for firms to deleverage.

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Reduced government borrowing in recent years has played a big part in the boom in European corporate debt issuance, according to research by Barclays Capital. Total bond issuance by business and government grew at a more or less constant rate over the last decade. But until the mid90s, the government was borrowing massively, while private sterling issuance bumped along under £10bn a year. As government issuance fell with a net redemption of gilts every year from 1998 to 2001 so the private bond market leaped, growing in double digits every year from 1996 to 2000 and reaching roughly four times its level of the early part of the decade.

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