THE EXPANSION OF THE SWEDISH HIGH YIELD CORPORATE BOND MARKET - An abductive research of the development and nature of the Swedish high yield corporate bond market of the 2010s

Abstract

The time period spanning from 2010-2020 was to the Swedish economy initially characterized as a phase of recovery from the financial crisis of 2007-2008, and furthermore a decade of rather stable economic growth without any major disrupting elements of crises or recessions. In this overall favourable economic environment, the corporate bond market, and more explicitly - the high yield corporate bond market, has stood out with an extraordinary growth of over 1000% during the given time period. This is to be compared with its historically dominating counterpart of loaning through main financial institutions that grew with 269%. The dramatic growth trend of the high yield corporate bond market raises questions of what may have caused this development and the possibility of changed conditions regarding how Swedish companies choses to finance themself. The intent with this thesis was to analyze the Swedish high yield corporate bond market with respect to market characteristics such as prominent industries, composition and underlying cause(s) of the recent growth trend of the last decade. Only non-financial corporations and bonds issued on the Swedish market were taken into account. The thesis is based on broad quantitative data in combination with seven interviews. The empirical section aims to cover three different perspectives of the market in order to get an objective view of the market. All data aggregated in the empirical section showed strong signs of an emergent high yield corporate bond market. The Swedish corporate bond market for non-financial corporations within the high yield segment measures up to the size of 110 billion SEK by 2020, where the real estate sector is the most prominent industry in the high yield segment as it stands for 45% of the market. Further industries which account for a large part of the market are the industrial and technology sector. A combination of factors are what constitutes the particular growth trend in the high yield segment, where a low repo rate in combination with harder requirements of core capital of conventional banks are represented as major factors of the expansion. The high yield market has also rapidly been growing as a result of an increasing recognition and rationalization of the high yield corporate bond market and thus developed into a mature market.