Bond traders discovered the world wasn't flat last year.
Among the 13 major international credit markets, public debt climbed to $9.40 trillion in 1987 from $7.53 trillion in the previous year, according to a report released last week by Salomon Brothers Inc.That was an 11.3 percent gain as measured by constant exchange rates. But in U.S. dollar terms the increase was 25 percent, reflecting the dollar's depreciation, the report said.
The need for credit throughout the world has grown by leaps and bounds in recent years as corporations expand, economies change and trading becomes more globalized.
Eight years ago, the world bond market, which includes government, corporate and municipal issues, totaled about $2.83 trillion, about a fifth of last year's figure, according to Salomon.
The Salomon report, its seventh annual, had few major changes from the previous year, except that the market share of U.S. dollar-denominated bonds issued in 1987 continued to fall while the Japanese market gained a bit more ground.
Also, primary market activity in the foreign and Eurobond sectors slowed in 1987. "Most of the drop can be attributed to a steep falloff in U.S dollar-denominated issuance, reflecting diminished demand for U.S. denominated assets," the report said.
The drop in market share among U.S. dollar-denominated bonds and notes, to 44.3 percent from 48.7 percent in 1986, was largely due to a $70 billion decline in the fiscal 1987 federal deficit, the report said.
It said outstanding Treasury issues increased by 12 percent, compared to a 15 percent rise in 1986. The volume of government agency debt also climbed at a slower pace, 23 percent, vs. 27 percent in 1986. The gains in municipal and corporate issues, though, were up from the previous year, according to the report.
Despite the drop, the U.S. dollar bond market remained by far the largest major bond market in the world last year, with public issues totaling $4.165 trillion, compared to $3.66 trillion in 1986.
The Japanese yen bonds came in a distant second, with public issues totaling $2.12 trillion for a 22.6 percent market share, and West German deutschemark was third, with $811.5 billion issues and an 8.6 percent share, Salomon said.
The others were: Italian lira, $540.1 billion and 5.7 percent share; French franc, $336.8 billion and 3.6 percent; British sterling, $332.7 billion and 3.5 percent; Belgian franc, $196.8 billion and 2.1 percent; Canadian dollar, $192.9 billion and 2.1 percent; Swiss franc, $171.7 billion and 1.8 percent; Danish krone, $171.2 billion and 1.8 percent; Swedish krona, $160.6 billion and 1.7 percent; Dutch guilder, $128.4 billion and 1.4 percent; and Australian dollar, $73.6 billion and 0.8 percent, Salomon said.
Although many more countries issue bonds, Salomon doesn't include them in its count because their markets are less developed or less liquid.