Forget the broken banking system
Even governments face supply constraints
In early December 2008, Société Générale compiled wide-ranging forecasts for euro-denominated debt capital markets issuance in 2009. Even while recognizing that extreme nervousness might close the markets down at various points this year, and basing its central estimate on markets being open for just nine months out of 12, the bank still expects €1.5 trillion of debt issuance, almost a return to the 2007 volume of €1.602 trillion and an increase of 35% on the €1.18 trillion of new debt sold in the first 11 months of 2008.
Even if markets are shut for half of 2009, the bank still expects a 15% increase in volumes over the 2008 figure for the year to the start of December.
The lion’s share of this increase will come from sovereigns, supranationals and agencies as governments seek to fund financial system bailouts and economic stimulus as revenues slump. The bank also expects government-guaranteed bank debt, a new sector that came into being only in the last quarter of 2008, to become a €300 billion market in 2009.
