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published: 8.15.03
New issue activity surged in the U.S. bond market during the first half of the year and is on pace to break the record set last year. Issuance totaled $3.6 trillion, up 43.3 percent from the $2.5 trillion issued during the same period in 2002. Debt issuance grew with the support of a favorable market environment —historically low interest rates, a slow growing economy and state and local governments’ need to finance budget deficits. Issuance volumes were significantly higher across all sectors in the first half of the year, with the exception of the corporate market, which showed modest growth compared to the first half of 2002. The mortgage-related market was especially strong due to high levels of refinancing and purchase loan originations, and accounted for over 46 percent of total U.S. bond issuance. Secondary market trading volume was up across all markets in the first half of the year.
Rising interest rates associated with stimulative fiscal policy and accelerated economic growth set the stage for a challenging second half of the year. Refinancing driven non-Treasury issuance will be more affected than new money issuance.
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