Corporate bond issues as a proportion of national income have ranged 3-3.5 percent of the GDP from the time since policy attention focused on developing this market to replace the closure of development finance institutions.
With such elements intact for over two decades, it won’t be any surprise if this time turns out no different from past episodes of negative real rates.
Perhaps rapid growth then provided extra fuel, and helped by the infrastructure investment push to replace demand loss after the 2008 crisis, total non-financial bond volumes touched 2 percent of the GDP in 2009-10.
The latter deviation is explained by finance and infrastructure companies that raised 90-92 percent of the funds, no doubt to strengthen balance sheets, and finance public investments as was the case in the late nineties and early 2000s; these entities enjoy implicit sovereign guarantee and best pricing as a result of which market-sourced debt is better.
Both past trends and persistence of backward features indicate the current cycle is no different.
Wishing bond market development on spurious signs will not deliver one, but improving corporate governance to inspire the trust essential for financial contracts may do so.