Swedish High Yield Corporate Bond Market - A market outlook in the light of increasing financial regulations

University essay from Göteborgs universitet/Företagsekonomiska institutionen

Abstract: The high yield corporate bond market in Sweden has been all but inex-istent until the last five years. The financial crisis that erupted in 2008has led to a more regulated environment (Basel III) for the financialsector in general. This has given corporations incentives to search foralternative financing when bank loans become more expensive and thebanks are getting more risk averse. At the same time, investors are alsoseeking investment alternatives other than the stock market due to itspoor performance during the last decade.This thesis was done with the intent to analyze the Swedish high yieldcorporate bond market in order to understand the market potential andlikely development within a five-year time frame. Only bonds issued onthe Swedish market was considered.The study was performed through theory studies in combination withnine interviews covering four different perspectives of the high yield cor-porate bond market that finally were analyzed.All data gathered showed strong signs of an increasing growth rate ofthe Swedish high yield corporate bond market. The Swedish high yieldmarket size today is about 15 billion SEK compared to the Norwegiansize of over 106 billion NOK. The real estate sector in combination withother capital intensive sectors such as industrials are believed to accountfor the main future growth. Larger single issues and longer maturitiesare also likely.Although the Swedish market will likely experience a strong growth inthe coming years, it is hard to quantify due to its vulnerability to volatileeconomic conditions and financial turmoil.

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