Reforms in corporate debt: Big unfinished agenda

Updated: Dec 31 2006, 07:23am hrs
Bank issuances dominated the market this year; the structured market saw loan sell downs. Corporate issues were subdued. I expect bank issues to continue, with corporate issuance picking up and the structured market moving towards CDO's/CLO's. I also expect that the full impact of Fitch Ratings sovereign upgrade will be felt in 2007.

The big unfinished agenda is reforms to the "corporate debt market." The high level committee under Dr Patil has already made its recommendations that I would like to see implemented. I would like the corporate bond market to display the same dynamism that our equity markets display.

We worry about interest rates. For some time we have believed that it is the low interest rates that have been responsible for the higher growth rates that we have witnessed - they helped cut down the fiscal deficit (although it is still high), made money available at affordable rates to consumers to buy cars, houses etc, all of which have a multiplier effect, and brought down cost structures for corporate.

The requirement for funds is huge if the economy is to continue to grow at these rates - or close to these rates. If interest rates rise, its impact will be felt across the system.

The author is managing director, Fitch Ratings