De Dollar Hegemonie 24

'FT.com / World / US & Canada.

Euro displaces dollar in bond markets.

Euro displaces dollar in bond markets.
By David Oakley and Gillian Tett in London

The euro has displaced the US dollar as the world's pre-eminent currency
in international bond markets, having outstripped the dollar-denominated market
for the second year in a row.
The data consolidate news last month that the value of euro notes in
circulation had overtaken the dollar for the first time. Outstanding debt issued in
the euro was worth the equivalent of $4,836bn at the end of 2006 compared with
$3,892bn for the dollar, according to International Capital Market Association
data.
Outstanding euro-denominated debt accounts for 45 per cent of the global
market, compared with 37 per cent for the dollar. New issuance last year accounted
for 49 per cent of the global total.
That represents a startling turnabout from the pattern seen in recent
decades, when the US bond market dwarfed its European rival: as recently as 2002,
outstanding euro-denominated issuance represented just 27 per cent of the global
pie, compared with 51 per cent for the dollar.
The rising role of the euro comes amid growing issuance by debt-laden
European governments. However, the main factor is a rise in euro-denominated issuance
by companies and financial institutions.
One factor driving this is that European companies are moving away from their
traditional reliance on bank loans and embracing the capital markets to
a greater degree.
Another is that the creation of the single currency in 1999 has permitted
development of a deeper and more liquid market, consolidated by a growing
eurozone.
This has made it more attractive for issuers around the world to raise funds
in the euro market. And, more recently, the trend among some Asian and Middle
Eastern countries to diversify their assets away from the dollar has further
boosted this trend.
Ren Karsenti, executive president of ICMA, said: "It is the stable
interest rates in Europe that have helped and the fact that [the euro] has
strengthened and shown resilience."
Since the start of 2003, the European Central Bank's main interest rate
has fluctuated only 1.5 percentage points, ranging from a low of 2 per cent in
the middle of that year to 3.5 per cent, its rate today.
In comparison, the Fed funds rate, the main US interest rate, has fluctuated
4.25 percentage points, ranging from 1 per cent in the middle of 2003 to 5.25
per cent, its level today. The euro has also risen to trade around $1.30
against the dollar, from around parity three years ago. Sterling issuance has grown
in the past three years, reinforcing its attraction as a niche currency among
some investors. The yen, in comparison, has fallen out of favour.
Overall, international capital markets have doubled in size in terms of bond
issuance during the past six years.'