U.S. CAPITAL MARKETS DECK

U.S. CAPITAL MARKETS DECK

SIFMA RESEARCH OCTOBER 2015

Introduction America has the largest and deepest capital markets in the world – according to the Federal Reserve, the capital markets provide approximately 75% of debt financing for businesses in the U.S. The securities industry facilitates access to those markets, creating investor opportunity, capital formation, job creation and economic growth.

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• In 2014, market capitalization – the total value of all publicly traded securities – of the U.S. stock market was $27 trillion.

• 300 companies conducted initial public offerings in 2014 in the U.S. raising over $94 billion in new capital – new values for the companies, their employees and their investors.

• The $7.7 trillion corporate bond market is the largest in the world: approximately 1,200 U.S. companies issued $1.5 trillion in corporate bonds to fund their operations and growth in 2014.

• Municipal issuers raised over $338 billion in 2014 to finance important community infrastructure projects including schools, airports, roads and bridges.

U.S. Economy – GDP

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• U.S. GDP was $17.3 trillion as of end-2014, up 36.3% from $13.1 trillion in 2005.

2005 20140

2

4

6

8

10

12

14

16

18

20

Source: Bureau of Economic Analysis

GDP 2005 and 2014

$ Trillions

19.3% 16.5%

67% 68%

-5.6% -3.1%

19.1% 18.2%

2005 2014-20%

0%

20%

40%

60%

80%

100%


GDP By Category 2005 and 2014

GovernmentConsumption &Investment

Net Exports ofGoods andServices (Exports- Imports)

PersonalConsumptionExpenditures

Gross PrivateDomesticInvestment(Corporate)

U.S. Economy – GDP Detail

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2005 20140

2

4

6

8

10

12

14


GDP By Category - Personal Consumption 2005 and 2014

Durable Goods

NondurableGoods

Services

$ Trillions

2005 20140

0.5

1

1.5

2

2.5

3

3.5


GDP By Category - Gross Private Domestic Investment (Corporate)

Nonresidential FixedInvestment

Residential FixedInvestment

Change in PrivateInventories

$ Trillions

U.S. Economy – GDP in Perspective

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• In 2005, U.S. GDP was nearly three times as large as Japan’s GDP, nearly six times as large as China’s GDP, and 91.5% of the EU28 GDP.

• As of 2014, U.S. GDP grew to nearly four times that of Japan, nearly twice as large as China’s GDP and 94.0% of EU28 GDP.

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2

4

6

8

10

12

14

16

18

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2005 2014Sources: World Bank

Gross Domestic Product of Selected Regions 2005 - 2014

Japan

US

European Union

China

$ Trillions

0

10

20

30

40

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60

2005 2014Sources: World Bank

Gross Domestic Product Per Capita of Selected Regions

2005 - 2014

Japan

US

European Union

China

$ Thousands

Note: European Union includes the 28 EU-member states; China excludes Hong Kong

U.S. Economy - Employment

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• U.S. nonfarm employment stood at 145 million as of end-2014, up 3.9% from 139 million in 2005.

0

20

40

60

80

100

120

140

160

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Source: Thomson Reuters

U.S. Employment 2005 - 2014

Government Farm Nonfarm ex. GovernmentMillions Transportation and

warehousing 3%

Finance and insurance

4%

Administrative and waste

management services

6%

Agriculture, Mining, Utilities,

Construction 6%

Manufacturing 8%

Health care and social assistance

13%

Trade 15%

Government 17%

Other 28%

U.S. Employment, 2014 Total: 145.2 million


U.S. Corporate Financing in Perspective

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Note: Euro Area includes the 19 EU-member states that have adopted the Euro currency

• U.S. companies rely on the capital markets for a greater portion of total funding than do companies

in the Euro Area, Japan or China, which rely more on bank funding.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

U.S. Euro Area Japan China (2012)Sources: OECD, ECB, Bank of Japan, National Bureau of Statistics of China

Financing of non-financial corporations 2014

Other Financing

Other Equity

Quoted Shares

Bonds

Loans

U.S. Corporate Debt Financing in Perspective

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Note: EU includes the 28 EU-member states

• U.S. companies rely more on the debt capital markets for credit financing than do those in the

European Union or Japan, which rely more on bank loans for funding.

76%

21%

75%

24%

79%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EU US JapanSources: Bank of Japan, ECB, Federal Reserve

Financing of non-financial corporations' debt 2014

Debt Securities Outstanding

Stock of Bank Lending

Equity Markets as % of GDP

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Note: Includes only non-financial corporate equities; Euro Area includes the 19 EU-member states that have adopted the Euro currency; China excludes Hong Kong

• The U.S. has a larger equity market relative to the size of GDP (152%), followed by Japan (107%),

the Euro Area (62%) and China (58%).

0%

20%

40%

60%

80%

100%

120%

140%

160%

U.S. Euro Area Japan ChinaSources: OECD, Bank of Japan, ECB, World Bank, World Federation of Exchanges

Size of Listed Equity Market as % of GDP 2014

Bond & Equity Markets as % of GDP

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Note: Includes only non-financial corporate equities; Euro Area includes the 19 EU-member states that have adopted the Euro currency; China excludes Hong Kong

• The U.S. has the largest bond and equity market relative to the size of GDP (358%), followed by

Japan (336%), the Euro Area (180%) and China (100%).

0%

50%

100%

150%

200%

250%

300%

350%

400%

U.S. Euro Area Japan ChinaSources: BIS, World Bank, World Federation of Exchanges

Size of Listed Bond & Equity Market as % of GDP 2014

U.S. Capital Markets

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Note: Issuance includes long-term corporate, agency and non-agency MBS and CMOs, agency debentures, Treasury, and municipal securities, and primary and secondary equity issuance. Outstanding includes both short- and long-term debt securities and equity market capitalization.

Bond Market 95%

Equity Market 5%

U.S. Capital Markets Issuance - Equity vs Bonds, 2014

Total: $6.2 trillion

Source: Bloomberg, Dealogic, Thomson Reuters, US Agencies, US Treasury, SIFMA

Bond Market 58%

Equity Market 42%

U.S. Capital Markets Outstanding - Equity vs Bonds, 2014

Total: $66.9 trillion

Source: NYSE, NASDAQ, Federal Reserve, Bloomberg, U.S. Agencies, U.S. Treasury, SIFMA

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U.S. Bond Markets: Issuance Between 2005 and 2014

• Treasury issuance increased from 13.5% to 37.7% of total U.S. bond issuance

• Corporate issuances increased from 13.6% to 24.4%

• Mortgage-related issuances decreased from 48.7% to 22.9%.

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3

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Source: Thomson Reuters, Bloomberg, Dealogic, US Treasury, US Agencies, SIFMA

U.S Long-Term Bond Issuance 2005 - 2014

Corporate Asset-Backed Non-Agency MBS Agency MBSFederal Agency Muni/State Treasury

$ Trillions

U.S. Bond Markets: Outstanding

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• The total value of outstanding bonds in the U.S. was $39.0 trillion at the end of 2014, 47.6% larger

than at end-2005.

• While all sectors increased in dollar volume outstanding between 2005 and 2014, Treasuries and

corporates increased relatively more than the other products. Treasuries rose from 16% to 32%

and corporates rose from 17% to 20%, respectively, between 2005 and 2014.

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5

10

15

20

25

30

35

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Source: Bloomberg, Thomson Reuters, US Treasury, US Agencies, Federal Reserve, SIFMA

U.S. Bond Market: Outstanding 2005 - 2014

Treasury Muni/State Federal Agency Agency MBSNon-Agency MBS Asset-Backed Corporate

$ Trillions

Treasury Bond Markets: A Closer Look

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• The U.S. Treasury issues different maturities of debt: • Short Term or Bills (up to one year) and • Long-Term or Notes (one year to 10 years) and Bonds (over 10 years).

• In 2014, the U.S. Treasury issued $2.2 trillion in new securities, almost three times the $746.1 billion issued in 2005.

• The U.S. Treasury bond market outstanding was $12.5 trillion as of end-2014, up three-fold from end-2005.

Bills 68%

Notes 29%

Bonds 3%

U.S. Treasury Bond Issuance By Tenor, 2014 Total: $7.0 trillion

Source: U.S. Treasury

0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Source: U.S. Treasury

U.S. Long-Term Treasury Bond Issuance 2005 - 2014

$ Billions

Municipal Bond Markets: A Closer Look

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• Municipal bonds are issued by state and local governments, agencies and authorities. There are over 55,000 different municipal bond issuers.

• In 2014, $337.5 billion in municipal securities were issued, 17% below the $407.2 billion in 2005.

• The municipal bond market outstanding was $3.7 trillion as of end-2014, up 21% from end-2005.

Education 24%

General Purpose

24% Transportation

15%

Utilities 11%

Healthcare 6%

Housing 3%

Development 3%

Other 14%

Municipal Issuance By Type, 2014 Total: $337.5 billion

Source: Thomson Reuters 0

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100

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450

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Municipal Issuance 2005 - 2014

GO Revenue

$ Billions

Corporate Bond Markets: A Closer Look

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• Corporate bonds can be divided into investment grade (IG) and high yield (HY) based on their credit rating. IG bonds have ratings of BBB to AAA, while HY bonds have credit rating below BB. Bonds that have not been rated are also counted as HY.

• In 2014 $1.4 trillion of corporate bonds were issued, almost double the $750.0 billion in 2005.

• The size of the corporate bond market was $7.8 trillion at end-2014, up 70.7% from 2005.

Financials 43%

Energy and Power 16%

Healthcare 8%

Industrials 6%

High Technology

5%

Media and Entertainment

5%

Materials 4%

Other 13%

Corporate Bond Market Issuance, 2014 Total: $1.4 trillion

Source: Thomson Reuters

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400

600

800

1,000

1,200

1,400

1,600


Corporate Bonds Issuance 2005 - 2014

High Yield

Investment Grade

$ Billions

Mortgage-Related Markets: A Closer Look

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• The mortgage-related securities market is comprised of: • Agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs) • Non-agency commercial residential mortgage-backed securities (CMBS) and residential

mortgage-backed securities (RMBS).

• In 2014, mortgage-related securities issuance totaled $1.3 trillion, half of the $2.7 trillion in 2005.

• The mortgage-related market had $8.7 trillion outstanding at end 2014, up from $7.2 trillion in 2005.

Agency MBS 73%

Agency CMO 16%

Non-Agency CMBS

7%

Non-Agency RMBS

4%

Mortgage-Related Issuance By Type, 2014 Total: $1.3 trillion

Sources: Bloomberg, Dealogic, Thomson Reuters, US Agencies, SIFMA

0

500

1,000

1,500

2,000

2,500

3,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Bloomberg, Thomson Reuters, Dealogic, Fannie Mae, Freddie Mac, Ginnie Mae, SIFMA

Mortgage-Related Issuance 2005 - 2014

Non-AgencyAgency

$ Billions

Asset-Backed Markets: A Closer Look

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• Asset-backed securities are backed by cash flows of non-mortgage collateral such as auto loans, credit card balances or student loans.

• In 2014, $225.4 billion of asset-backed securities were issued in 2014, down 22% from 2005.

• The asset-backed market had $1.3 trillion outstanding as of the end of 2014, up 4.8% from 2005.

Auto 43%

Credit Cards 23%

Equipment 8%

Housing-Related

10%

Other 10%

Student Loans 6%

Asset-Backed Issuance By Type, 2014 Total: $225.4 billion


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Asset-Backed Issuance 2005 - 2014

$ Billions

Agency Bond Markets: A Closer Look

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• Agency bonds are debt securities issued by U.S. federal agencies or government-sponsored enterprises (GSEs). The largest three agency issuers are Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Banks (FHLBs).

• In 2014, $377.4 billion in agency securities were issued, down 41% from the $635.0 billion in 2005.

• The agency bond market had $2.0 trillion outstanding at end 2014, down from $2.6 trillion in 2005.

Fannie Mae 10%

Federal Farm Credit 18%

Federal Home Loan Banks

52%

Freddie Mac 20%

Long-Term Agency Bond Issuance by Agency, 2014 Total: $377.4 billion


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400

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800

1,000

1,200

1,400


Long-Term Agency Bond Issuance 2005 - 2014

$ Billions

Equity Market: A Closer Look

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• Most of the equity issued in the U.S. is in the form of common stock, which represents ownership in a corporation, with the balance issued in preferred stock, which combines features of debt and equity. Common shares can be divided further into Initial Public Offerings (IPOs) - the first sale of stock to the public and secondary offerings – every subsequent stock issuance by that.

• In 2014, stock offerings raised $311.4 billion, up 69.2% from $184.0 billion in 2005.

• As of end-2014, U.S. equity market capitalization stood at $27.9 trillion, 45.2% higher than in 2005.

Preferred Stock 12%

Initial Public Offerings

32%

Secondary Offerings

56%

U.S. Equity Market Issuance, 2014 Total: $311.4 billion


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U.S. Equity Market Issuance 2005 - 2014

Preferred Stock

Initial PublicOfferings

$ Billions

Equity Market: A Closer Look at IPOs

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• IPOs can be divided into “true” IPOs which are offered by companies going public and those offered by closed-end mutual funds.

• In 2014, $94.3 billion was raised in “true” IPOs, up 144.1% from $38.6 billion in 2005 and $6.5 billion in closed-end IPOs, 71.3% down from $22.7 in 2005.

High Technology

37%

Financials 19%

Energy and Power 14%

Healthcare 10%

Retail 5%

Real Estate 4%

Materials 4%

Other 7%

"True" IPO Issuance, 2014 Total: $94.3 billion


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Equity Issuance 2005 - 2014

Closed-end funds IPOs

"True" IPOs

$ Billions

U.S. CAPITAL MARKETS DECK

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