European Bond Sales Fall To Lowest Level For 10 Years
While many people complained that the levels of debt throughout the world would cause major problems in the long term, for many years they were ignored. However a quick look at the European bond market shows how far the sector has fallen with just 22 billions Euros raised in May 2008 against 214 billion Euros in May 2007, a fall of near 90%!
The problems were two fold in that banks were approving massive loans, many of which would become problem loans when the property market turned, but they were then selling these debts on to bond investors. As more customers defaulted on their original loans, the income, i.e. client repayments, started to reduce which meant that many banks were forced to find funds from elsewhere to cover their liabilities. This situation arose literally overnight as the credit crunch hit home and there is still a great reluctance by many of the major market players to invest into bonds even after the falls.
It seems that with hindsight, those who questioned the ever increasing levels of debt around the world were right to query the trend as there is no doubt the situation is acutely worse because of the levels of debt.
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