INTERNATIONAL BORROWING REACHES RECORD IN 1986
Record high borrowing of 376 billion dlrs
in 1986 on international capital markets was supported by a
large volume of debt refinancing and growing integration
between national and international markets, the OECD said.
    The Organisation for Economic Cooperation and Development
(OECD) said in its latest Financial Market Trends report the 34
pct rise over 1985 volume was accompanied by major changes in
the relative importance of the instruments used in
international financing.
    Straight bond offerings, equity related securities and
euro-commercial paper programmes as a share in total financing
rose to their highest level this decade. The markets for
floating-rate notes and for note issuance facilities declined.
    The OECD said another striking feature of international
capital markets in 1986 was the unprecedented concentration of
lending to the OECD group of western industrialised countries,
which accounted for 90 pct of total borrowing.
    Factors behind the heightened pace of activity included a
notable decline in interest rates which boosted borrowing
through the flotation of fixed-interest securities.
    This in turn was stimulated by growing familiarity with new
techniques such as interest rate and currency swaps.
    Stockmarket buoyancy supported the expansion of
equity-related bond issues and favoured the expansion of a
rapidly expanding market for euro-equities.
    A slowdown in net demand for funds by sovereign borrowers
was more than offset by a large volume of refinancing
operations induced by improved market conditions and stronger
debt management policies. Growing integration with national
markets meant the arrival of a large number of new players on
international markets.
    It added the development of a smoothly-functioning market
for short-term euro-notes made committee and non-underwritten
issuance facilities an increasingly popular alternative to
traditional forms of bank lending.
    Turning to 1987, the OECD pointed to indications of a
possible slowdown of international markets' expansion and
possibly less easy borrowing terms in a number of market areas.
    It said many market participants saw little scope for a
further decline in long-term rates and anticipate a slowdown in
the pace of fixed-rate activity in the months ahead.
    It saw little reason for a turnaround in the decline in
demand of recent years, although it was likely more borrowers
would try to make use of cost-reducing opportunities provided
by the market for euro-commercial paper.
    "It remains to be seen however to what extent the ECP market
will be ready to absorb a significant volume of paper from
lower-rated borrowers," the report said, adding that any major
advance in the euro-note market's absorptive capacity would
require a significantly broader investor base.
 Reuter
