BIS publishes indicators of global liquidity and analysis of oil market developments

The BIS today released an updated set of indicators of global liquidity, which are intended as measures of the ease of financing in global financial markets.

Alongside the global liquidity indicators, the BIS also published a preliminary analysis of the oil-debt nexus, exploring recent developments in oil markets, and noting that:

• recent changes in production and consumption are not enough by themselves to explain the extent and timing of the drop in oil prices. One should consider the nature of crude oil as a financial asset, and consequently its sensitivity to expectations and financing constraints;
• the increased debt burden of the oil sector has affected price dynamics, with the falling price weakening the balance sheets of producers and potentially exacerbating the price drop through hedging activity and by delaying production cuts; and
• heightened volatility and balance sheet strains among producers could reduce the willingness of dealers to provide hedging instruments to the oil sector.

The latest BIS global liquidity indicators, which cover data through September 2014, highlight the following developments:

• As banking systems recover, and with risk appetites remaining strong, bank lending has strengthened as a channel for global liquidity, alongside persistently high volumes of global bond market issuance. The historical pattern where low levels of volatility coincide with a rapid growth of cross-border banking flows may be starting to reassert itself.
• At end-September 2014, credit in US dollars to non-bank borrowers outside the United States totalled $9.2 trillion, an increase of 9.2% over a year earlier. This represents an increase of over 50% since end-2009. The total comprised $4.2 trillion of debt securities and $4.9 trillion of bank loans.
• Long-term debt issuance continues to be supported by extraordinarily low long-term yields, which for some sovereigns are now negative for a significant portion of the yield curve.
• Cross-border bank credit continues to grow especially rapidly in Asia.
• Within the euro area, a small increase in cross-border bank credit signals the progressive reintegration of the European banking system in the wake of the 2011-12 sovereign debt crisis.