RTTNews - Monday, a Quarterly Review from the Bank of International Settlements showed that borrowings in the international debt securities market grew in the first quarter, reflecting a gradual return of confidence. Net issuance increased to US$670 billion from US$519 billion the previous quarter.
According to the BIS report, borrowing via bonds and notes was dominated by the U.S., while it declined in the U.K. to US$90 billion from US$285 billion.
The Switzerland-based BIS said glimmers of hope that the worst of the financial crisis and economic downturn had passed sparked a rebound in risk appetite among investors in the period between end-February and end-May. Optimism developed even as economic indicators remained at depressed level and equity prices increased significantly.
A number of policy measures contributed importantly to the improvement in investor sentiment. The BIS said macroeconomic data turned out to be less gloomy than expected, particularly for the U.S. But positive news remained scarce in Japan.
According to BIS, huge fiscal stimulus measures and rapidly falling tax revenues led to a rise in fiscal deficits across the globe, resulting in increased issuance of government bonds. This sharply rising deficits have led to concerns about the sustainability of public finances and the ability of some governments to fulfill their enlarged obligations. Due to a rise in real or perceived sovereign credit risk in some cases induced investors to demand higher compensation to hold government debt, thereby pushing bond yields higher.
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