How will EU private sector debt markets change?

Domestic private sector debt markets are likely to increase strongly with the advent of the Euro. International bond issuance of countries in the Euro zone should decline, given the favourable refinancing conditions in the increasingly liquid domestic private sector bond market. While public sector issuance should slow further, growth of secondary markets for private sector bonds will continue. International competition for public sector budget-financing and for mortgage lending will strongly intensify. Narrowing margins intensify the trend towards securitization. This trend will likely drive out spreads between private sector bonds issued on liquid well-organised and illiquid markets. Cross-border financing activities will lead to a diversification of credit portfolios and increase the need for credit monitoring.