Global Debt Watch

Ever wondered about the size of the debt/bond markets in terms of outstanding marketable debt and debt issuances in various categories of debt? Trends in this market data are essential to understanding the stability of the global securities markets in general. Below are data I compiled from several sources on outstanding marketable debt, including detail on U.S. issuances. The two primary data sources are the Securities Industry and Financial Markets Association (SIFMA) and the Bank of International Settlements (BIS)In addition, Federal Reserve data sources are used to track the size of important U.S. short-term funding markets, particularly the commercial paper market (FRB Statistical Releases) and the repurchase agreement market (NY Fed Primary Dealer Financing). At the top are the latest data in table format from SIFMA (quarterly) and BIS (semiannually), followed by historical data prepared in chart format from BIS and SIFMA data. Integrated are historical data in chart format for the commercial paper and repo markets. I plan to update this data quarterly, and to add more detail in the future, such as a drill-down trend on debt market categories in each listed country market.

Notes on the latest data and trends (8/22/2011):

9/9/2011: Added Fed data on U.S. commercial paper and repo markets; added SIFMA data on CDO issuances.
9/12/2011: Added BIS historical data.
9/14/2011: Added ICMA (Eurozone) and BoE repo data; Added SIFMA U.S. MBS/ABS Issuance and Eurozone Securitization Issuance historical detail.

SIFMA data: In the U.S., Treasury and corporate issuances continue to climb briskly since 2009, and comprise the largest increases to total outstanding marketable debt. Mortgage debt issuances have dropped since 2009, when the total outstanding mortgage debt peaked; since then outstanding mortgage debt has leveled off. Money Market debt has decreased consistently from its peak in 2007, reflecting the shrinkage of the commercial paper market from its 2007 peak (the outstanding commercial paper market contracted from $2,160.7B in July 2007 to $1,056.8B in July 2011, a 51% decline). SIFMA money market data does not include repurchase agreements (repos), an instrument that the money markets use for short-term funding. This is broken out separately below under the Fed data. SIFMA also publishes issuances on collateralized debt obligations (CDO), the primary structured finance instrument used throughout the mortgage and asset-backed securities boom that started in earnest in 2000 and plateaued in 2006/7 before dropping sharply. The historical chart on CDO issuances shows that majority of CDOs were issued for arbitrage (off-balance sheet) opportunities.

BIS data: Total estimated marketable debt outstanding worldwide ~$95T, having more than doubled from Dec 2002 to Dec 2010. The U.S. maintains the largest outstanding debt market, with Japan second at less than half. Domestic debt dominates the Japan and China markets, with international issuances minor. The second largest international debt market to the U.S. is the U.K., followed by Germany. Comparing these debt markets to GDP estimates is useful: Japan, Spain and the U.S. hold the top three total outstanding marketable debt/GDP ratios. Sovereign government debt issuance (58% of domestic debt issuance) is the largest growing category since Sept 2008. 

Differences between SIFMA/BIS: As of Q4/2010, SIFMA reported total outstanding U.S. marketable debt at $35,193.9B, while BIS reported $32,534.5B. This is a significant, almost $2.5T, difference. I asked SIFMA to comment on the difference and this was the answer: “The inclusion of offshore centers (Cayman Islands in particular) are included in our numbers. CDOs will always be a mixed category as we look to currency of issue rather than nationality of issuer or nationality of underlying assets.” BIS data lags SIFMA (only Q4/2010 is currently available, while SIFMA updates its data quarterly).

Fed CP & Repo Data: The Fed tracks both the U.S. commercial paper (CP) and repurchase agreement (repo) markets HERE and HERE. These markets are often used for short-term funding/financing by financial and nonfinancial (e.g. corporate) institutions, and were/are of significant focus by regulatory authorities given the past use of these markets by financial institutions and insurance companies to finance risky, higher-yielding structured products or debt securities. Historical data for the CP market is readily available going back to Jan 2001; from the peak in July 2007 ($2,160.7B) to the trough in June 2010 ($1,028.1B) this market declined 52%, the majority coming from the asset-backed and financial CP markets, particularly dealer placed. Prior to the July 2007 declines, financial institutions/dealers used CP for short-term funding of AB/MB CDO purchases, many of them for placement into off-balance sheet structured investment vehicles. The sharp declines in this sector are a result of the failures that occurred from CDO losses, and the subsequent declines in the structured finance market (and hence the decline of demand in CP to fund it). The largest increases since 2009 are in the directly placed financial CP market. Data for the repo market* is readily available from July 2001 onward; from the peak in March 2008 ($4,567.2B) to the trough in Sept 2009 ($2,221.4B) this market declined by over 51%, similar to the declines in the CP market. Like the CP market, the repo market was used to finance the growth in the CDO market; the repo market seized starting in March 2008 when counterparties realized that the collateral backing certain repos were fast declining in value, namely mortgage or asset-backed securities, causing counterparty jitter and subsequent liquidity problems (cash investors in the repo, or reverse-repo counterparties, sought to sell short questionable collateral causing market liquidity issues). Comparatively, we’ve seen greater “recovery” of the repo market over the CP market, (24% vs. 2%, trough to present), though it looks like the CP market peaked on a relative basis in April 2011 (~13% trough to relative peak) in tandem with the equity markets and before the sovereign debt crisis flared up. The Depository Trust and Clearing Corporation (DTCC) tracks the repo market HERE with a proprietary index, which reflects average repo interest rates based on a sample of the par values of collateral backing the repos. As of Sept 2011, par values of MBS and agency (Fannie/FHLMC) collateral had declined substantially from prior terms, as had those for Treasuries, which generally make up the majority of repo collateral.

*The NY Fed states that repo and reverse-repo transactions recorded in its surveys are unique transactions, not double counted; hence the total of these market transactions is also shown below. The Fed itself does participate in the repo/reverse repo market in its open market operations (OMO); the eligible firms that participate as a repo/reverse repo counterparty to the Fed are listed HERE (there are many, namely large money market funds, plus Fannie/Freddie). Note also that the Fed only openly reports primary dealer repo data from a survey of such dealers, not private over-the-counter transactions by bank holding companies, which BIS estimates could add some 30% to the total.

ICMA Repo Data: ICMA surveys some 57 Eurozone institutions for repo market data, which can be found HERE. Historical data on the Eurozone repo trend is in chart format below, and coincides with the issuance trends of MBS and CDOs shown in the SIFMA Eurozone securitization issuance data, also below.

BoE Repo Data: Bank of England repo market data from surveys of U.K. participants can be found HERE. Historical data is found in chart format below.