4. _Corporate debt securities:_ Unlike the rest of the fixed income market in the United States, issuance of corporate debt actually declined during 2002 – approximately 26% to $594.4 billion. This decline can be attributed to several factors, including investor concerns about corporate credit, the overall reduction in corporate capital raising, and the effect of the corporate and accounting fraud scandals. There appeared to be a slight increase in corporate debt issuance at the beginning of 2003.

Despite the recent decline, however, the US corporate debt securities market remains extremely large, especially when compared with the corporate debt markets in other countries. At the end of 2000, the total market value of outstanding corporate bonds in the United States was approximately $3.4 trillion. During 2002, $807 billion of corporate debt was issued, compared to $284 billion of common stock. The US corporate debt securities market is much larger than that of any other country. At the end of 1997, there was roughly $5 trillion of US corporate debt outstanding, making the US market at that time about twice as large as the international debt market for corporate securities and approximately 50 percent larger than the combined corporate debt markets of Japan and the major European countries.<sup>5</sup> _5. Mortgage-related securities:_ The year 2002 saw approximately $2.3 trillion in total issuance of mortgage-related securities, an increase of nearly 40% from 2001. The majority of this amount, approximately $2 trillion, was issued by the GSEs; private issuers were responsible for the remainder.<sup>6</sup> This substantial increase in the mortgage-backed securities market in 2002 was due in large part to low interest rates, which sparked home sales and mortgage refinancing. It is noteworthy that the market in outstanding mortgage-related securities in 2002 was significantly larger than the outstanding debt of the US government.

_6. Asset-backed securities (other than mortgages):_ Approximately $485.4 billion of asset-backed securities were issued in 2002, up 14% from 2001. The substantial majority of these securities were issued in public offerings. The largest segments of asset-backed securities, other than mortgage-related securities, are those relating to automobile loans, credit card debt, and home equity loans.

_7. Money markets:_ The US money markets consist of a large number of diverse products, including both public and private instruments, that all mature in less than one year. Money market products include US Treasury bills, municipal notes, bank certificates of deposit, commercial paper, federal funds, repurchase agreements, call loans and bankers’ acceptances.<sup>7</sup> As of the end of 2002, the

> 5 IMF, 1998.

> 6 The private label issuers consist largely of commercial banks, savings associations, mortgage companies, and investment banking firms.

> 7 Short-term mortgage-related and asset-backed securities (primarily GSE securities) frequently are used for open market operations and for funding purposes to finance broker-dealer businesses, primarily through repurchase agreements or “repos.”  Repos are secured financing arrangement that allow broker-dealers to finance their activities, bring liquidity to the market and give flexibility to firms.   Repos are usually very

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