borrowing in the world debt securities market plunged 77% in the Q3 of 2008

The Bank for International Settlements (BIS) said on December 7, that borrowing in the world debt securities market plunged 77% to $247 billion in the third quarter of 2008 compared with the second quarter, amid the continued turmoil in financial markets.

The decline is "well beyond normal seasonal patterns" and resulted in the lowest level of net issuance since the third quarter of 2005.

Here is from FinFacts:

Net issuance of bonds and notes decreased to $247 billion, down substantially from $1,086 billion in the second quarter. The decline was well in excess of normal seasonal patterns, and resulted in the lowest level of net issuance since the third quarter of 2005.

Money market borrowing also stagnated, with net issuance falling into negative territory in the third quarter. By currency of denomination, the largest decrease in bond and note issuance came from the euro-denominated segment, followed by the dollar-denominated segment, while the breakdown by nationality of issuers indicates that the largest contraction in net issuance came from US borrowers, down from $308 billion in the second quarter to $46 billion in the third quarter.

Outstanding claims in the international banking market diminished sharply during the second quarter of 2008 . BIS reporting banks' international claims fell by an unprecedented $1.1 trillion, with sizeable declines recorded across claims in most currencies of denomination. While a significant decrease in interbank claims (-$812 billion) accounted for most of that decline, international claims on non-banks also fell for the first time since 1998, mainly vis-à-vis the United States, the United Kingdom and Japan. At the same time, residents of emerging markets and many central banks around the world reduced their placements of funds with BIS reporting banks.

The BIS said market developments over the period under review went through four more or less distinct stages. Stage one, which led into the Lehman bankruptcy in mid-September, was marked by the takeover by the US authorities of the government-sponsored housing finance agencies Fannie Mae and Freddie Mac. Stage two encompassed the immediate implications of the Lehman bankruptcy and the crisis of confidence it triggered. Stage three, starting in late September, was characterised by fast-paced and increasingly broad policy actions, as the response to the crisis evolved from case by case reactions to a more international, system-wide approach. In the fourth stage, from mid-October, pricing patterns were increasingly dominated by recession fears, while markets continued to struggle with the uncertainties surrounding the large number of newly announced policy initiatives.

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BIS warns global lending collapse, ZIRP & monetary stimulus may come at a cost

Sources :

1. FinFacts: Bank for International Settlements says world debt borrowings plunged sharply in Q3 2008, December 8, 2008 9:06:41 AM
2. The Wallstreet Journal: World Debt Borrowings Fall 77%, December 7, 2008, 8:39 P.M. ET
   

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