Death of Corporate Bonds Is Worth Investigating: William Pesek

Henry Paulson's "bazooka" is looking more like an intercontinental ballistic missile, Bloomberg reported.

That's the word the former Treasury secretary used in August to explain the firepower of hundreds of billions of dollars of U.S. stimulus. In November, China rolled out its own $586 billion bazooka. India, Indonesia, Japan, Malaysia and Singapore intend to raise spending to boost growth.

Two things are worth noting about this unprecedented deluge. One, it marks the end of the corporate-bond market as we know it. It's not going too far to declare corporate bonds dead for the foreseeable future. Two, Asia's efforts to develop deeper debt markets are now on the backburner.

Government debt is already the U.S.'s most precious export. Paulson's successor, Timothy Geithner, will oversee an even bigger expansion of debt issuance.

Asia, too, will see an unprecedented bond boom. Why? Today's growth forecasts are just way too optimistic. The International Monetary Fund expects Asia's developing economies will expand 5.5 percent this year, the slowest pace since 1998. That's highly optimistic considering the U.S., Japan and Europe are in recession, and China may be heading that way.

How can companies hope to compete? The corporate market already has been hurt in secondary trading and primary-market issuance. Asia is about to see the next wave.

Governments have few options here and stimulus is badly needed. With so many bazookas being deployed, private companies risk being crowded out of debt markets, according to the Manila- based Asian Development Bank. Companies face multiple financing risks as they navigate global turmoil and increased competition.

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