BIS global liquidity indicators at end-March 2022

Key takeaways

  • Growth in foreign currency credit (loans and bonds) to non-bank borrowers slowed in dollars but expanded in euros. Foreign currency credit to EMDEs remained resilient.
  • Against the backdrop of rising interest rates and geopolitical tensions, partial data on issuance of syndicated loans and bonds foreshadow weaker growth in credit to EMDEs in Q2 2022.

The BIS global liquidity indicators (GLIs) track credit to non-bank borrowers, covering both loans extended by banks and funding from global bond markets through the issuance of international debt securities (IDS). The main focus is on foreign currency credit denominated in three major reserve currencies (US dollars, euros and Japanese yen) to non-residents, ie borrowers outside the respective currency areas. The GLIs monitor growth in this credit relative to that denominated in those same currencies to residents within these currency areas (as reported in national financial accounts).8

In Q1 2022, foreign currency credit stagnated in dollars but expanded in euros. As a result, the year-on-year (yoy) growth rates diverged (Graph 7.1). Dollar credit to non-bank borrowers outside the United States stood at $13.4 trillion at quarter end, some 3% higher than a year earlier (Annex Graph C.4). Growth in euro credit to non-bank borrowers outside the euro area accelerated to 11% yoy, pushing the stock to €3.8 trillion ($4.2 trillion). Yen credit to non-bank borrowers outside Japan grew for the first time since end-2020, at 1% yoy, to stand at ¥47 trillion ($0.4 trillion). In all three currencies, issuance of IDS continued to outpace bank loans (Graph 7.2 vs 7.3).

Foreign currency credit to non-banks in EMDEs remained resilient through end-March, having expanded at roughly 5% per annum in both dollars and euros in recent years. This left the stocks at $4.2 trillion and €0.8 trillion respectively (Table E2-USD and E2-EUR). In all regions, yoy growth rates remained positive, except for euro credit to Latin America (Graphs 8.1 and 8.2). During Q1 2022, total foreign currency credit to EMDEs increased by $44 billion after adjusting for exchange rate effects (Graph 8.3). Borrowers in Asia-Pacific accounted for $35 billion of this expansion, mainly through dollar credit.

Looking ahead, higher-frequency but partial data from Dealogic, which cover both issuance of syndicated loans and bonds, can help to assess global liquidity conditions in the second quarter (Graphs 9 and 10). The data suggest that the deterioration in market sentiment following the start of the war in Ukraine and the broad-based surge in inflation coupled with expectations of faster-than-anticipated policy tightening by the major central banks weighed on foreign currency credit to EMDE corporates. During Q1, net monthly issuance (gross issuance minus redemptions) of foreign currency-denominated syndicated term loans to NFCs in EMDEs turned negative, by $8 billion (Graph 9.1). The downward trend continued in Q2, with a cumulative decline of $13 billion by end-June 2022 (black dots). This is in contrast with AEs, where net issuance of foreign currency syndicated loans remained positive in both Q1 and Q2 2022 (Graph 9.2).

Monthly data on global bond issuance also show signs of weakness, particularly for EMDEs (Graph 10.1 and 10.2).9 Net issuance (in dollars, euros, and yen) by NFCs in EMDEs (residency basis) turned negative in February 2022 (–$10 billion). This downward trend continued into the second quarter, when net issuance declined by a further $8 billion (Graph 10.2, blue bars). Aggregating net EMDE issuance on a nationality basis10 shows an even sharper cumulative decline of $21 billion by March, and even $58 billion by end-June (Graph 10.2, red line). The $37 billion contraction in the stock of outstanding foreign currency bonds between April and June 2022 was the largest quarterly decline recorded to date. Bonds issued by Chinese NFCs accounted for nearly $24 billion (65%) of this.

A prolonged tightening of financial conditions makes it more expensive for EMDE corporates to refinance their foreign currency debt. For EMDE NFCs as a group, $158 billion in debt securities denominated in dollars, euros and yen will mature between June and December 2022 (Graph 10.3). Asian NFCs have the largest refinancing needs ($110 billion), with Chinese firms accounting for 67% of all upcoming redemptions in the region ($74 billion). This is followed by borrowers headquartered in Latin America ($19 billion), Africa and the Middle East ($17 billion), and emerging Europe ($12 billion).

8  For more details, see the    GLI methodology.

9  The stock of outstanding bonds issued by EMDE borrowers is lower than that of AE borrowers. The drop is thus sharper for EMDEs as a percentage of the outstanding stock.

10 Data compiled on a nationality basis associate the issuance of EMDE-headquartered NFCs with the corresponding EMDE when the firm issues in AEs or offshore financial centres.

The BIS ceased receiving data from public authorities in Russia after 28 February 2022. Where possible, data publication will be continued if the BIS is able to use data from public or commercial sources.