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2003Complete report (117 KB PDF)
Medium-term notes (MTNs) outstanding at the end of 2003 totaled $556 billion (table 1), up from $516 billion in 2002. The growth mirrored that of corporate bonds, and the ratio of MTNs outstanding to the sum of MTNs and bonds outstanding held steady at 12 percent. Outstandings at financial firms increased $48 billion, while the continuing runoff at nonfinancial firms reduced their outstandings by about $8 billion. Among financial firms, most sectors showed an increase in MTNs outstanding; the largest increase was again at non-auto finance companies, where outstandings rose $25 billion, to $212 billion. The second largest increase among financial firms was $16 billion in the "other" category, which consists of insurance and real estate firms and miscellaneous investing institutions. Among nonfinancial firms, the levels of outstandings declined almost across the board; the only exception was the wholesale and retail trade category, which was unchanged from 2002. The largest decline was in the electric, gas, and water companies group.
Despite the overall increase in outstandings, the number of MTN programs fell in 2003 to 442, the lowest number since 1997 (table 2). The number of financial MTN programs dipped from 188 in 2002 to 185 in 2003. The number of nonfinancial MTN programs fell more sharply in 2003, to 257, the lowest number since 1993; the largest decrease, 8 programs, was in the electric, gas, and water companies sector. Since 1993, manufacturing has lost, on balance, 13 programs, the most of any sector.
By rating, AAA-rated MTNs outstanding recorded the largest net increase in 2003, and the vast majority of total MTNs outstanding continue to be rated investment grade (those rated BBB or higher) (table 3). Outstanding speculative grade MTNs, those rated BB or lower or in the "other" rating category, fell somewhat and accounted for only 3 percent of total outstandings. In 2003, speculative grade MTNs accounted for about 1 percent of outstandings issued by financial firms and for about 12 percent of outstandings issued by nonfinancial firms, proportions similar to those in 2002.
As is consistent with the increase in MTNs outstanding, gross issuance rose $34 billion, to $292 billion, in 2003 (table 4). The gain is more than accounted for by the financial sector, in which asset-backed issuance rose $32 billion and issuance by the "other" category of financial firms rose $16 billion. Gross issuance by finance companies dropped significantly but remained elevated relative to its history. In the nonfinancial group, fewer firms are tapping the MTN market, and issuance was down in most sectors. Overall, gross issuance by nonfinancial firms fell sharply, from $20 billion to $13 billion. Firms in the telephone and communication sector did not use the MTN market in 2003, reducing gross issuance by $3 billion.
The ratings distribution of MTN issuance in 2003 was similar to that for outstanding MTNs (table 6). Among speculative-grade firms, those rated BB issued only $50 million of MTNs, those rated B issued none, and those in the "other" credit-quality category issued about $4 billion.