Table 2 Net foreign purchase of US long-term securities Government bonds  Governmentsponsored 1 agency bonds  Corporate bonds  Corporate stocks  Total  1995  134,115  28,729  57,853  11,240  231,937  1996  232,241  41,723  83,743  12,511  370,218  1997  184,171  49,853  84,358  69,597  387,979  1998  49,039  56,802  121,930  50,020  277,791  1999  –9,953  92,200  160,392  107,522  350,161  2000  –53,790  152,841  182,403  174,890  456,344  1  Includes bonds issued by U.S. government corporations and federal agencies. Source: IMF. Central banks around the world have been a driving force behind the trend toward collateralisation. First, they have been relying increasingly on repo transactions to implement their monetary policy. Like many of its peers, the Swiss National Bank, which traditionally operated exclusively on the basis of foreign exchange swaps, now steers the liquidity supply primarily through repo transactions. Second, central banks typically grant intraday credits, which are relevant for smoothing settlement in payment systems, against collateral. Intraday repos have been available from the Swiss National Bank since 1999, on demand and at zero interest. The trend toward collateralisation creates additional business opportunities for providers of financial market infrastructure, but it also increases their systemic relevance.
Indeed, since the linkages among cash, securities, and derivatives markets have become so close, a failure - either by a provider itself or by a major participant - is very likely to cause disturbances affecting different markets at the same time. In addition to collateralisation, the appetite for securities has been forcefully stimulated by the changing needs of private and public wealth owners: the ongoing institutionalisation of the savings process, the facilitation of direct market access through internet technology, the disintermediation of the banking system due to credit risk considerations and the relative decline in attractiveness of bank deposits. On the supply side, the corporate sector has been increasingly relying on bond financing rather than on traditional bank borrowing. In the US, private debt securities amount to about USD 7 trillion. The ratio of bank credits to GDP has remained more or less stable at around 10% for the last 50 years, while the ratio of bond financing to GDP has risen sharply from 15% in 1985 to 25% in 2000. Bond financing within the European corporate sector has also caught up, strongly supported by the inception of the euro at the beginning of 1999. In short, the supply of securities is bound to grow further; cyclical ups and downs are likely, but the trend will point upwards. Notwithstanding obvious differences between economies, it is generally true that the corporate sector will make further progress in exploiting the potential advantages offered by open capital markets. The European corporate bond market seems an especially interesting case.