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Corporate bonds have long been a particularly stable and reliable source of term finance for nonfinancial - services companies in the ‘real economy’. The importance of corporate bonds for issuing companies has grown, particularly as bank lending has been squeezed, and is likely to continue to grow. Bonds are a pivotal mechanism for creating and sustaining enterprise, business investment, and economic growth. Corporate bonds offer a range of advantages to investors, in particular for individuals and funds that need stable and predictable income and retention of capital value, for example to save for retirement. They are an important means to stimulate private investment and limit citizens’ dependence on the public sector.
Primary and secondary markets in corporate bonds link corporate issuers and investors efficiently around the world. Domestic and international corporate bond markets provide for diverse needs. Domestic markets cater in particular for smaller, growing companies, and domestic investors. International markets – the constituency of ICMA and the prime focus of this paper - enable large companies and conglomerates to draw on global pools of capital, including those which represent the savings and pensions of individuals, for major development projects; and they enable institutional investors to obtain well diversified and consistent returns. The existence of different markets helps today’s startups and smaller enterprises grow into tomorrow’s major companies, by helping them to generate wealth while graduating smoothly into more sophisticated and international financial and investment environments.
Corporate bond markets are also important to governments to help meet the urgent global public policy challenges presented by ageing populations, and the need to maintain growth whilst remedying the imbalances that led to the 2008 market turmoil. They help limit government indebtedness, whilst offering investors an alternative to government bonds.