Europe's corporate bond market is shrinking as redemptions outstrip issuance, banks borrow and lend less, and companies stockpile cash rather than invest in their businesses.
Banks have sold about 335 billion euros ($427 billion) of bonds in the common currency and pounds this year, down from 443 billion euros last year, 503 billion euros the year before and a record 671 billion euros in 2009. Banks cut their lending to euro-area companies by 45 billion euros in the third quarter from a year earlier, according to the European Central Bank.
“It's not clear whether the lack of bank lending is a reflection of broken banks or more a problem of dire economic outlooks for corporates,” said David Watts, a strategist at CreditSights Inc. in London. “Companies that are able to do so are tapping the bond markets. The rest either can't or don't want to borrow.”
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