Sources, Data as of Q1 2014 Primary: Securities Industry and Financial Markets Association (SIFMA), S&P Capital IQ, A part of McGraw Hill Financial, Bank for International Settlements (BIS), Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries, S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, Investment Company Institute, U.S. Department of the Treasury, Bureau of the Fiscal Service. Secondary: Over twenty-five investment industry, research, and media sources. Percentages and totals are estimated due to rounding. Keys: Other (MM=US Money Market, ABS= US Asset Backed Security, MUNI= US Municipal Bond). Conv/Pref = US Convertible and Preferred. Source date is available by request to contact@7Twelveadvisors.com. Use of this research is permitted for non-commercial purposes only with proper citation as 3Twelve Total World Bond™ and inclusion of primary sources.
World bond markets experienced a deleveraging overall between 4th quarter 2013 and 1st quarter 2014. All twelve categories except US High-Yield dropped in net values (total issue value – index return). Index returns were up in each category but net values were down (again, except US High Yield), which suggests that redemptions exceeded new issues. By this measure European “austerity” programs are working: Emerging Markets and Non-US Governments experienced the biggest drop in net values. All things remaining equal the less corporate, government, and mortgage indebtedness (everything we measure), the better. However, US High Yields were a category unto themselves. In a stronger economy net issuance of US corporate debt of any rating would be welcomed. In the weak recovery that the US is experiencing, I believe that increasing junk bond levels could be a negative warning. Finally, regarding the baffling (to some) resistance of interest rates to rise, remember that it took the 20-Year Treasury bond 30 years (from roughly 1950-1980) to increase 10%. Interest rates traditionally rise slowly and gradually.
About the 3Twelve Total World Bond™ map:
The 3Twelve Total World Bond™ map may be the most complete compilation of world bond totals available. We are delighted to publish this exclusively with LearnBonds — the most comprehensive source for fixed-income.
Maintaining an accurate world bond total is virtually impossible for many reasons: 1) Bonds are the largest investment asset class and have almost double the monetary value of stocks, 2) Bonds do not have a perpetual life like stocks, so values constantly change, 3) Individual bond issues count in the millions, whereas stocks count only in the thousands, 4) Many bonds are privately traded and are never published on any exchange, 5) Even global clearinghouses like the Bank for International Settlements stated that they recently changed their calculation methodology because of difficulty of accurate estimating, 6) New issues of bonds are published, redemptions are not, 7) Bonds, Debt, and Loans are often mis-categorized, e.g., debt securities are always loans, but loans are not always debt securities, and 8) The primary sources that we cite report accurate data, however, secondary sources such as investment firms, banks, traders, investment advisors, and the financial press often unintentionally misinterpret this data. Because of this, we have at least triple-verified every data point with over twenty authoritative sources.
–Andrew D. Martin 10/9/14 (special thanks to Dalton Easterwood, research assistant, 7Twelve Advisors, LLC)