Swedish High Yield Corporate Bond Market - A market outlook in the light of increasing financial regulations

Abstract

The high yield corporate bond market in Sweden has been all but inex- istent until the last five years. The financial crisis that erupted in 2008 has led to a more regulated environment (Basel III) for the financial sector in general. This has given corporations incentives to search for alternative financing when bank loans become more expensive and the banks are getting more risk averse. At the same time, investors are also seeking investment alternatives other than the stock market due to its poor performance during the last decade. This thesis was done with the intent to analyze the Swedish high yield corporate bond market in order to understand the market potential and likely development within a five-year time frame. Only bonds issued on the Swedish market was considered. The study was performed through theory studies in combination with nine interviews covering four different perspectives of the high yield cor- porate bond market that finally were analyzed. All data gathered showed strong signs of an increasing growth rate of the Swedish high yield corporate bond market. The Swedish high yield market size today is about 15 billion SEK compared to the Norwegian size of over 106 billion NOK. The real estate sector in combination with other capital intensive sectors such as industrials are believed to account for the main future growth. Larger single issues and longer maturities are also likely. Although the Swedish market will likely experience a strong growth in the coming years, it is hard to quantify due to its vulnerability to volatile economic conditions and financial turmoil.