Markets
Ranked: The Largest Bond Markets in the World
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The Largest Bond Markets in the World
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In 2022, the global bond market totaled $133 trillion.
As one of the world’s largest capital markets, debt securities have grown sevenfold over the last 40 years. Fueling this growth are government and corporate debt sales across major economies and emerging markets. Over the last three years, China’s bond market has grown 13% annually.
Based on estimates from the Bank for International Statements, this graphic shows the largest bond markets in the world.
Ranked: The World’s Top Bond Markets
Valued at over $51 trillion, the U.S. has the largest bond market globally.
Government bonds made up the majority of its debt market, with over $26 trillion in securities outstanding. In 2022, the Federal government paid $534 billion in interest on this debt.
China is second, at 16% of the global total. Local commercial banks hold the greatest share of its outstanding bonds, while foreign ownership remains fairly low. Foreign interest in China’s bonds slowed in 2022 amid geopolitical tensions in Ukraine and lower yields.
Bond Market Rank | Country / Region | Total Debt Outstanding | Share of Total Bond Market |
---|---|---|---|
1 | 🇺🇸 U.S. | $51.3T | 39% |
2 | 🇨🇳 China | $20.9T | 16% |
3 | 🇯🇵 Japan | $11.0T | 8% |
4 | 🇫🇷 France | $4.4T | 3% |
5 | 🇬🇧 United Kingdom | $4.3T | 3% |
6 | 🇨🇦 Canada | $4.0T | 3% |
7 | 🇩🇪 Germany | $3.7T | 3% |
8 | 🇮🇹 Italy | $2.9T | 2% |
9 | 🇰🇾 Cayman Islands* | $2.7T | 2% |
10 | 🇧🇷 Brazil* | $2.4T | 2% |
11 | 🇰🇷 South Korea* | $2.2T | 2% |
12 | 🇦🇺 Australia | $2.2T | 2% |
13 | 🇳🇱 Netherlands | $1.9T | 1% |
14 | 🇪🇸 Spain | $1.9T | 1% |
15 | 🇮🇳 India* | $1.3T | 1% |
16 | 🇮🇪 Ireland | $1.0T | 1% |
17 | 🇲🇽 Mexico* | $1.0T | 1% |
18 | 🇱🇺 Luxembourg | $0.9T | 1% |
19 | 🇧🇪 Belgium | $0.7T | >1% |
20 | 🇷🇺 Russia* | $0.7T | >1% |
*Represent countries where total debt securities were not reported by national authorities. These figures are the sum of domestic debt securities reported by national authorities and/or international debt securities compiled by BIS.
Data as of Q3 2022.
As the above table shows, Japan has the third biggest debt market. Japan’s central bank owns a massive share of its government bonds. Central bank ownership hit a record 50% as it tweaked its yield curve control policy that was introduced in 2016. The policy was designed to help boost inflation and prevent interest rates from falling. As inflation began to rise in 2022 and bond investors began selling, it had to increase its yield to spur demand and liquidity. The adjustment sent shockwaves through financial markets.
In Europe, France is home to the largest bond market at $4.4 trillion in total debt, surpassing the United Kingdom by roughly $150 billion.
Banks: A Major Buyer in Bond Markets
Like central banks around the world, commercial banks are key players in bond markets.
In fact, commercial banks are among the top three buyers of U.S. government debt. This is because commercial banks will reinvest client deposits into interest-bearing securities. These often include U.S. Treasuries, which are highly liquid and one of the safest assets globally.
As we can see in the chart below, the banking sector often surpasses an economy’s total GDP.
As interest rates have risen sharply since 2022, the price of bonds has been pushed down, given their inverse relationship. This has raised questions about what type of bonds banks hold.
In the U.S., commercial banks hold $4.2 trillion in Treasury bonds and other government securities. For large U.S. banks, these holdings account for almost 24% of assets on average. They make up an average 15% of assets for small banks in 2023. Since mid-2022, small banks have reduced their bond holdings due to interest rate increases.
As higher rates reverberate across the banking system and wider economy, it may expose further strains on global bond markets which have expanded rapidly in an era of dovish monetary policy and ultra-low interest rates.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
---|---|---|
EURO STOXX 50 | 14.9 | 2.2 |
STOXX Europe 600 | 14.4 | 2 |
U.S. | 25.9 | 4.7 |
Canada | 16.1 | 1.8 |
Japan | 15.4 | 1.6 |
Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
---|---|---|---|---|---|---|
EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
Canada | 1.00 | 0.22 | 0.40 | |||
Japan | 1.00 | 0.88 | ||||
Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
Index | Description | Market Cap |
---|---|---|
STOXX Europe 600 | Pan-regional, broad market | €10.5T |
STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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