U.S. CAPITAL MARKETS DECK SIFMA RESEARCH SEPTEMBER 217
Introduction The United States has the largest and deepest capital markets in the world according to the Federal Reserve, capital markets provide almost 8% of debt financing for businesses in the U.S. The securities industry facilitates access to those markets, creating investor opportunity, capital formation, job creation and economic growth. U.S. stock market market capitalization the total value of publicly traded domestic companies was $27.4 trillion as of end-216. Over 1 companies conducted initial public offerings in the U.S. in 216 raising over $17.8 billion in new capital creating new value for the companies, their employees and their investors. The $8.5 trillion corporate bond market is the largest in the world: almost 1,4 companies issued $1.5 trillion in corporate bonds to fund their operations and growth in 216. U.S. municipal issuers raised $445.8 billion in 216 to finance important community infrastructure projects including schools, airports, roads and bridges. 2
U.S. Economy GDP U.S. gross domestic production was $18.6 trillion in 216, up 28.3% from $14.9 trillion in 27. GDP (Real) 27 and 216 GDP By Category (Real) 27 and 216 2 18 16 $ Trillions 1% 8% 19.1% 18.2% Government Consumption & Investment 14 12 1 8 6 6% 4% 2% 67% 68% Net Exports of Goods and Services (Exports - Imports) Personal Consumption Expenditures 4 2 27 216 % -2% 19.3% 16.5% -5.6% -3.1% 27 216 Gross Private Domestic Investment (Corporate) Source: Bureau of Economic Analysis Source: Bureau of Economic Analysis 3
U.S. Economy GDP Detail GDP By Category - Personal Consumption 27 and 216 GDP By Category - Private Domestic Investment (Corporate) 14 $ Trillions 3.5 $ Trillions 12 3 Change in Private Inventories 1 Durable Goods 2.5 8 2 Residential Fixed Investment 6 Nondurable Goods 1.5 4 Services 1 Nonresidential Fixed Investment 2.5 27 216 27 216 Source: Bureau of Economic Analysis Source: Bureau of Economic Analysis 4
U.S. Economy GDP in Perspective In 27, U.S. GDP was more than three times as large as Japan s GDP, more than four times as large as China s GDP, and 19.1% smaller than the EU28 GDP. In 216, U.S. GDP was more than four times that of Japan, 1.5 times large as China s GDP and 13.2% greater than EU28 GDP. 2 Gross Domestic Product of Selected Regions 27-216 $ Trillions 7 Gross Domestic Product Per Capita of Selected Regions 27-216 $ Thousands 18 16 14 12 1 8 Japan US European Union China 6 5 4 3 Japan US European Union China 6 4 2 2 1 27 216 Sources: World Bank Note: European Union includes the 28 EU-member states; China excludes Hong Kong 27 216 Sources: World Bank 5
U.S. Economy - Employment U.S. employment stood at 149 million as of end-216, up 4.% from 143 million in 27. U.S. Employment, 216 Total: 148.7 million U.S. Employment 27-216 Transportation and warehousing 3% Finance and insurance 4% Administrative and waste management services 6% 16 14 Millions Government Private Other 28% Agriculture, Mining, Utilities, Construction 6% 12 1 8 Government 17% Trade 15% Health care and social assistance 13% Source: Bureau of Economic Analysis Manufacturing 8% 6 4 2 27 28 29 21 211 212 213 214 215 216 Source: Bureau of Economic Analysis 6
U.S. Corporate Financing in Perspective U.S. companies rely on the capital markets for a greater portion of total funding than do companies in the Euro Area, Japan or China, which rely more on bank funding. 1% Financing of non-financial corporations 216 9% 8% 7% 6% Bonds Equity Other Financing Loans 5% 4% 3% 2% 1% % U.S. Euro Area Japan China (214) Sources: Organizsation for Economic Co-operation and Development (OECD), European Central Bank (ECB), Bank of Japan, National Bureau of Statistics of China Note: Euro Area includes the 19 EU-member states that have adopted the Euro currency 7
U.S. Corporate Debt Financing in Perspective U.S. companies rely more on the debt capital markets for credit financing than do those in the European Union or Japan, which rely more on bank loans for funding. 1% Debt financing of Non-Financial Corporations 216 9% 8% 25% 2% 7% 6% 5% 8% Debt Securities Outstanding Stock of Bank Lending 4% 3% 2% 75% 8% 1% % 2% US EU Japan Sources: Bank of Japan, European Central Bank, Federal Reserve Note: EU includes the 28 EU-member states 8
Equity Markets as % of GDP The U.S. has a larger equity market relative to the size of GDP (147%), followed by Japan (12%), China (65%) and the European Union (55%). 16% Size of Listed Equity Market as % of GDP 216 14% 12% 1% 8% 6% 4% 2% % U.S. EU Japan China Sources: OECD, Bank of Japan, ECB, World Bank, World Federation of Exchanges Note: Includes only non-financial corporate equities; EU includes the 28 EU-member states; China excludes Hong Kong 9
Bond & Equity Markets as % of GDP The U.S. has the largest bond and equity market relative to the size of GDP (353%), followed by Japan (345%), the European Union (25%) and China (149%). 4% Size of Listed Bond & Equity Market as % of GDP 216 35% 3% 25% 2% 15% 1% 5% % U.S. EU Japan China Sources: BIS, World Bank, World Federation of Exchanges Note: Includes only non-financial corporate equities; EU includes the 28 EU-member states that have adopted the Euro currency; China excludes Hong Kong 1
U.S. Capital Markets U.S. Capital Markets Issuance - Equity vs Bonds, 27 Total: $7.5 trillion U.S. Capital Markets Outstanding - Equity vs Bonds, 216 Total: $68.3 trillion Equity Market 3% Equity Market 42% Bond Market 58% Bond Market 97% Source: Bloomberg, Dealogic, Thomson Reuters, US Agencies, US Treasury, SIFMA Source: NYSE, NASDAQ, Federal Reserve, Bloomberg, U.S. Agencies, U.S. Treasury, SIFMA Note: Issuance includes long-term corporate, agency and non-agency MBS and CMOs, agency debentures, Treasury, and municipal securities, and primary and secondary equity issuance. Outstanding includes both short- and long-term debt securities and equity market capitalization. 11
U.S. Bond Markets: Issuance Between 27 and 216: Treasury issuance increased to represent from 12.7% to 29.9% of total U.S. bond issuance Corporate issuance increased from 19.1% to 21.% Mortgage-related issuance decreased from 42.% to 26.4% U.S Long-Term Bond Issuance 27-216 8 7 6 5 4 3 2 1 $ Trillions Corporate Asset-Backed Mortgage-related Federal Agency Muni/State Treasury 27 28 29 21 211 212 213 214 215 216, Bloomberg, Dealogic, US Treasury, US Agencies, SIFMA 12
U.S. Bond Markets: Outstanding The total value of outstanding bonds in the U.S. was $39.4 trillion at the end of 216, 52.6% larger than at end-27. Municipals, corporates and Treasuries increased in dollar volume outstanding between 27 and 216, with Treasuries doubling, corporates growing 61.9% and municipals growing by 12.% between 27 and 216. 4 35 3 25 2 15 1 5 $ Trillions U.S. Bond Market: Outstanding 27-216 Treasury Municipal Federal Agency Mortgage-related Asset-Backed Corporate 27 28 29 21 211 212 213 214 215 216 Source: Bloomberg, Thomson Reuters, US Treasury, US Agencies, Federal Reserve, SIFMA 13
Treasury Bond Markets: A Closer Look The U.S. Treasury issues different maturities of debt: Short Term or Bills (up to one year) and Long-Term or Notes (one year to 1 years) and Bonds (over 1 years). In 216, the U.S. Treasury issued $2.2 trillion in new long-term marketable securities, almost three times the $752.2 billion issued in 27. The U.S. Treasury marketable bond market outstanding was $13.9 trillion as of end-216, up over three-fold from $4.5 trillion at end-27. U.S. Treasury Bond Issuance By Tenor, 216 Total: $8.3 trillion Bonds 2% 2,5 2, U.S. Long-Term Treasury Bond Issuance 27-216 $ Billions Notes 24% 1,5 Bills 74% 1, 5 Source: U.S. Treasury 27 28 29 21 211 212 213 214 215 216 Source: U.S. Treasury 14
Municipal Bond Markets: A Closer Look Municipal bonds are issued by state and local governments, agencies and authorities. There are over 31, different municipal bond issuers with bonds outstanding. In 216, $445.8 billion in long-term municipal securities were issued, 3.9% above the $429.2 billion in 27. The municipal bond market outstanding was $3.8 trillion as of end-216, up 12.% from end-27. Housing 4% Municipal Issuance By Type, 216 Total: $43.1 billion Electric Power 3% Other 1% Education 28% 5 45 4 35 $ Billions Municipal Issuance 27-216 General Obligation Revenue Healthcare 1% 3 25 Transportation 11% Utilities 11% General Purpose 23% 2 15 1 5 27 28 29 21 211 212 213 214 215 216 15
Corporate Bond Markets: A Closer Look Corporate bonds can be divided into investment grade (IG) and high yield (HY) based on their credit rating. IG bonds have ratings of BBB to AAA, while HY bonds have credit rating below BB. Bonds that have not been rated are also counted as HY. In 216 $1.5 trillion of corporate bonds were issued, up 34.1% from $1.1 trillion in 27. The size of the corporate bond market was $8.5 trillion in 216, up 61.9% from $5.3 trillion in 27. Corporate Bond Market Issuance, 216 Total: $1.5 trillion Corporate Bonds Issuance 27-216 1,8 $ Billions Telecom 3% Media and Entertainment 4% Industrials 6% Other 14% Financials 45% 1,6 1,4 1,2 1, 8 High Yield Investment Grade Healthcare 8% 6 4 High Technology 7% Energy and Power 13% 2 27 28 29 21 211 212 213 214 215 216 16
Mortgage-Related Markets: A Closer Look The mortgage-related securities market is comprised of: Agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs) Non-agency commercial residential mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). In 216, mortgage-related securities issuance totaled $1.9 trillion, 23.1% below the $2.5 trillion in 27. The mortgage-related market had $8.9 trillion outstanding at end-216, down 4.8% from $9.4 trillion in 27. Mortgage-Related Issuance By Type, 216 Total: $1.9 trillion Mortgage-Related Issuance 27-216 Non-Agency CMBS 4% Non-Agency RMBS 4% 3, 2,5 $ Billions Non-Agency Agency Agency CMO 8% 2, 1,5 1, Agency MBS 84% 5 Sources: Bloomberg, Dealogic, Thomson Reuters, US Agencies, SIFMA 27 28 29 21 211 212 213 214 215 216 Source: Bloomberg, Thomson Reuters, Dealogic, Fannie Mae, Freddie Mac, Ginnie Mae, SIFMA 17
Asset-Backed Markets: A Closer Look Asset-backed securities are backed by cash flows of non-mortgage collateral such as auto loans, credit card balances or student loans. In 216, $283.9 billion of asset-backed securities were issued in 216, down 2.1% from 27. The asset-backed market had $1.3 trillion outstanding as of the end-216, down 31.7% from 27. Asset-Backed Issuance By Type, 216 Total: $283.9 billion Asset-Backed Issuance 27-216 Student Loans 6% 35 3 $ Billions 25 Other 19% Auto 33% 2 15 Equipment 5% Credit Cards 1% 1 5 CDO 27% 27 28 29 21 211 212 213 214 215 216 18
Agency Bond Markets: A Closer Look Agency bonds are debt securities issued by U.S. federal agencies or government-sponsored enterprises (GSEs). The largest three agency issuers are Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Banks (FHLBs). In 216, $915.5 billion in agency securities were issued, up 1.1% from the $831.2 billion in 27. The agency bond market had $2. trillion outstanding at end-216, down 32.2% from $2.9 trillion in 27. Long-Term Agency Bond Issuance by Agency, 216 Total: $915.5 billion 1,4 $ Billions Long-Term Agency Bond Issuance 27-216 1,2 Freddie Mac 26% Federal Home Loan Banks 34% Fannie Mae 22% Federal Farm Credit 18% 1, 8 6 4 2 27 28 29 21 211 212 213 214 215 216 19
Equity Markets: A Closer Look Most of the equity issued in the U.S. is in the form of common stock, which represents ownership in a corporation, with the balance issued in preferred stock, which combines features of debt and equity. Common shares can be divided further into Initial Public Offerings (IPOs) - the first sale of stock to the public and secondary offerings every subsequent stock issuance. In 216, stock offerings raised $197.6 billion, down 19.1% from $244.3 billion in 27. As of end-216, U.S. equity market capitalization stood at $27.4 trillion, 37.3% higher than in 27. U.S. Equity Market Issuance, 216 Total: $197.6 billion Preferred Stock 12% Initial Public Offerings 1% 35 3 25 2 $ Billions Preferred Stock Initial Public Offerings Secondary Offerings U.S. Equity Market Issuance 27-216 15 Secondary Offerings 78% 1 5 27 28 29 21 211 212 213 214 215 216 2
Equity Markets: A Closer Look at IPOs IPOs can be divided into true IPOs which are offered by companies going public and IPOs offered by closed-end mutual funds. In 216, $17.8 billion was raised in true IPOs, down 67.% from $53.9 billion in 27 and $3. billion in closed-end IPOs, 92.5% down from $39.8 billion in 27. "True" IPO Issuance, 216 Total: $17.8 billion 11 $ Billions IPO Issuance 27-216 Consumer Products and Services 7% Other 12% Healthcare 17% 1 9 8 Closed-end funds IPOs "True" IPOs 7 Real Estate 8% Energy and Power 16% 6 5 Retail 1% Financials 14% High Technology 16% 4 3 2 1 27 28 29 21 211 212 213 214 215 216 21