Interbank debt markets drying up once again
LENDING between banks appears to be drying up again as data out yesterday showed that bond issuance by British banks has fallen to its lowest level since 2008.
Despite a rush to sell debt in January that saw volumes surge briefly to their highest level in six months, overall bond issuance by British banks so far in 2012 is down 39 per cent on last year.
The data is a worrying sign for Europe’s economy, especially as it comes despite the European Central Bank’s unprecedented €1 trillion offering of three-year loans for EU banks. The radical action, started in December last year, was sparked by a collapse in interbank debt markets.
UK lenders went to the markets for $33.7bn (£20.1bn) in the first four months of this year, according to Dealogic. The last time volumes were lower over the same period was in 2008, when banks raised $33bn.
And of the debt sold so far this year, $4.7bn has been government-guaranteed as part of the Treasury’s credit easing programme.
But although UK volumes are at low levels, they still account for the largest share – 20 per cent – of European bank debt issuance in the year to date.