International bond markets were very active during the first quarter of 1993. Fixed-rate bond issues were a record, almost equalling issues during the last two quarters of 1992 combined. Government borrowers were particularly prominent. Refinancing was high; net corporate borrowing in the international markets remained low. Refinancing is likely to continue at high levels during the rest of 1993.
Confidence revived in some European sectors of the international bond markets, and the share of issues of international bonds in EC currencies recovered to near its pre-September level. Issues of international bonds in Ecu and minor European currencies increased, but were still lower than in the first half of 1992. The deutschmark retained the dominant position in bond issues it gained among European currencies after September. Sterling issues approached record levels.
During the first quarter, greater use was made of new debt instruments structured to meet particular issuer and investor demands. Product innovation continued in the derivative markets, as competition increased and markets developed further. In London, LIFFE further extended its range of European contracts.
Announcements of syndicated credits remained subdued, in contrast with the active bond markets, partly reflecting continued retrenchment by many international banks. In the United Kingdom, France and the Nordic countries, property-related lending still depressed banks' results, and Japanese banks are expected to report a fall in annual profits. US banks' performance continued to improve.
Major equity markets strengthened during the quarter. The rise in the UK stockmarket reflected the effects of lower interest rates; the fall in sterling, which boosted companies' overseas earnings and prospective exports; and greater expectations of domestic economjc recovery. New issues and secondary market turnover were high.