Essay Title: 

The financial system

March 24, 2016 | Author: | Posted in economics, mathematics and economics

Non-government bond issues have increased over the past five years , both in importance and value of issuance . Bank lending is now addressed to households in the first place , than to businesses . However , businesses have shown an increasing tendency to accessing debt directly through capital markets

It seems that in 2004 non-intermediated debt accounted for 21 per cent of Australian businesses ‘ in 1999 . the annual reports show that over the past five years the share of non-intermediated debt in the Australian businesses , reaching around 40 per cent , as shown in the table below [banner_entry_middle]

p Table 1 : Australian Businesses ‘ Sources of Debt Finances

June 1999 June 2004

Higher rated Lower rated Unrated Non-intermediated debt 11 .4 11 .9 1 .0 24 .3 27 .5 22 .4 8 .9 58 .8

Domestic bonds 1 .5 0 .9 0 .3 2 .7 6 .1 3 .5 2 .5 12 .1

– Unwrapped 1 .5 0 .9 0 .3 2 .7 6 .1 2 .2 0 .0 8 .3

– Credit wrapped 0 .0 0 .0 0 .0 0 .0 0 .0 1 .4 2 .5 3 .9

Offshore bonds 9 .9 10 .2 0 .0 20 .1 19 .7 13 .4 2 .6 35 .8

– Private placements 1 .3 2 .5 0 .0 11 .5 2 .4 9 .3 2 .6 14 .3

– Other 8 .7 7 .7 0 .0 8 .7 17 .3 4 .1 0 .0 21 .4

Hybrids 0 .0 0 .8 0 .7 1 .5 1 .7 5 .5 3 .8 11 .0

– Domestic 0 .0 0 .3 0 .7 1 .1 1 .7 3 .1 3 .8 8 .6

– Offshore 0 .0 0 .4 0 .0 0 .4 0 .0 2 .4 0 .0 2 .4

Intermediated debt 34 .8 30 .4 46 .2 111 .4 19 .5 33 .7 35 .3 88 .5

The table reveals the increased use of non-intermediated debt : domestic bonds ‘ share increased from 2 per cent to 8 per cent , offshore bonds share increased from 15 per cent to 24 per cent , hybrid securities share increased from 1 per cent to 7 per cent . The decrease of intermediated debts ‘ level is more evident among higher-rated businesses

Over the past five years , 82 per cent of non-intermediated debt raised by lower-rated and unrated businesses was either credit wrapped , hybrids or issued in the US private placement market

In the Reserve Bank of Australia ‘s view the non-government bond market is divided in four categories : bonds issued by financial institutions bonds issued by Australian corporations , asset-backed bonds and Australian dollar bonds issued in Australia by non-residents . As Mr . R Battellino , the Assistant Governor (Financial Markets , shows in the RBA Bulletin in August 2004 , the asset-backed bonds have rapidly grown over the past five years , reaching the value of over 60 billion (issued only in Australia , twice the size of the other categories of bonds that reach around 30 billion each . The 60 billion value reached by the asset-backed securities issued in Australia is… [banner_entry_footer]

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