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Global Bond Growth Rate Decelerates to Pre-Crisis Levels

Global Bond Growth Rate Decelerates to Pre-Crisis Levels: Credit Markets
By Sapna Maheshwari –
Jan 20, 2011 7:02 AM ET

The global bond market’s expansion is slowing for the first time since 2005 as governments withdraw stimulus and credit conditions improve.

The bond market grew 9.9 percent last year to $49.7 trillion, down from an 18.5 percent rise in 2009 when governments provided debt guarantees during the worst financial crisis since the Great Depression, according to Bank of America Merrill Lynch. The 10-year cumulative annual growth rate is 9.8 percent.

Slower growth may boost demand for borrowers from the U.S. government to junk-rated companies. Relative yields on corporate debt match the lowest since May and average prices have climbed 21 percent from the record low in October 2008. Bonds returned 4.9 percent last year and 5.3 percent in 2009, according to Bank of America Merrill Lynch’s Global Broad Market Index.

“Less supply boosts prices and narrows yield spreads,” said Anthony Valeri, market strategist with LPL Financial Corp. in San Diego, which oversees $293 billion. “All of that is positive for bond investors.”

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