Government measures aimed at stabilizing the financial markets appear to have had some positive effect between November and last month, the world’s largest central banking body said yesterday.
However, the impact of such massive state aid packages on budget balances is leading to intense pressure on the government debt market, the Bank for International Settlements (BIS) said in its BIS Quarterly Review.
“Policy measures aimed at stabilizing markets appeared to gain traction over the period,” it said.
Central bank action and guarantees offered by governments helped to curb volatility in interbank markets and boosted borrowing to record levels in January, when “numerous large corporate” bonds were issued.
“With a number of country authorities considering outright purchases of corporate bonds, and with guarantee programmes in place to support financial insurers, a long pipeline of pent-up issuance opened up in January,” the BIS said.
Bonds are essentially debt and can be issued by companies or countries that need funding.
Latest BIS statistics indicate that corporate borrowing jumped 150 percent to US$131 billion in January compared with the average levels during the same month in previous years.
The observation that measures are starting to have an effect appear to bear out the G10 group of central bankers’ assessment in January that these policies will “progressively play a positive role” in the recovery of the global economy.
Governments of several large Western economies, such as Britain and Germany, have unveiled plans to guarantee loans to help companies or banks obtain necessary funds amid a liquidity crunch.
Latest BIS statistics indicate that funding flows, which were blocked by a liquidity crunch in the third quarter, began to recover as early as the fourth quarter of last year.
The net amount of international bonds and notes or debt issued increased to US$624.3 billion, up almost 1.5 times that of the US$253.3 billion in the third quarter.
“The increase was well beyond normal seasonal patterns: The year-on-year rise over the fourth quarter of 2007 was 30 percent,” the BIS said.
Financial institutions recorded the largest jump, with issuances of bonds and notes rising to US$570 billion in the fourth quarter from US$252 billion in the third quarter.
The borrowing was supported by government guarantee schemes for bank bonds in Europe and in the US.
In particular, euro-denominated borrowing soared 10 times. Net issuance in euros spiked to US$337 billion in the fourth quarter from US$30 billion in the previous one.
While policies are easing funding, the massive state aid packages are harming budget balances and leading to pressure on the government debt market.
Governments are finding it “more challenging to raise money in bond markets.”
“Moreover, growing volumes of corporate issuance and government-guaranteed bank debt have meant that governments are facing increasing competition for investors,” the BIS said, adding that some eurozone countries have canceled debt auctions because of a lack of demand.
Even German bonds, which are viewed as one of the world’s safest assets, have failed to attract sufficient takers on several occasions.
Governments, such as the US, have been issuing bonds to fund stimulus plans or to trim their budget deficits.
The US, for instance, has been urging China, which holds US$696.2 billion in US Treasury bills — also the world’s largest amount, to keep buying US bonds.
CAUTION: Taiwanese should be alert, even if they have just liked or shared posts that would breach Beijing’s national security legislation for Hong Kong, the council said Due to the newly implemented Hong Kong national security legislation, the Mainland Affairs Council (MAC) has drawn up a list of what it described as “high-risk groups,” cautioning them not to travel to Hong Kong. People who support independence for Taiwan, Hong Kong, Tibet and Xinjiang; those who are critical of the Chinese Communist Party (CCP), the Hong Kong government and the “one country, two systems” concept; and those who donated to or voiced support for the Hong Kong anti-extradition bill movement are urged to refrain from visiting Hong Kong, the council said on its Web site. It released two posts on
HONG KONG SECURITY: The president blasted regulations requiring Taiwanese agents or political organizations to provide information on their Hong Kong-related activities President Tsai Ing-wen (蔡英文) yesterday warned of countermeasures should controversial Chinese national security legislation imposed on Hong Kong undermine or harm Taiwanese interests. Article 43 of the legislation empowers the Hong Kong Special Administrative Region to serve written notices to Taiwanese political organizations or individual agents to furnish information on their Hong Kong-related activities, including their personal particulars, finances, assets, expenditure and capital in the territory. Failure to comply or providing false or incomplete information can result in a fine of HK$100,000 (US$12,903) or imprisonment of six months or two years respectively. Tsai said that Taiwan would keep a close watch on how
MORAL COURAGE: The Ministry of Foreign Affairs urged the global community to face China’s intention to subdue Taiwan and reject such irrational requests The Ministry of Foreign Affairs yesterday strongly condemned the Chinese government for meddling with US officials’ interactions with Taiwan after FBI Director Christopher Wray revealed China’s efforts to discourage US officials from visiting Taiwan. The greatest long-term threat to the US’ information security and intellectual property, as well as its economic vitality, is China’s counterintelligence and economic espionage operations, Wray told a video event at the Hudson Institute in Washington. Beijing is engaged in a highly sophisticated and maligning foreign influence campaign, with methods that include bribery, blackmail and covert deals, he said. Giving an example, Wray said that when a US official
NEW HONG KONG LAW: A visit to Beijing-friendly nations or those with weak judicial systems could leave people at risk of deportation to China, a former MAC official said Beijing could request countries with which it has extradition agreements to deport Taiwanese to China to face criminal charges following the implementation of national security legislation for Hong Kong, a former Mainland Affairs Council (MAC) official warned yesterday. Some developing countries, and those close to China because of the Belt and Road Initiative, are likely to accommodate Beijing’s requests to extradite Taiwanese to China, said former deputy MAC minister Chen Ming-chi (陳明祺), who served from July 2, 2018, until May 20, and then returned to his former post as an assistant professor of sociology at National Tsing Hua University. While Taiwanese