The Securities Industry and Financial Markets Association reports that securities issuance reached US$1.43 trillion in the first quarter of 2008.

This represents an increase from the US$1.36 trillion issued in the fourth quarter of 2007, but is substantially lower than the US$1.8 trillion issued in the first quarter of 2007. The year-over-year issuance decline was the result of the uncertain capital market conditions over the past year, SIFMA said.

It noted that the sharpest declines occurred in the most credit risk sensitive sectors, including non-agency or private-label mortgage-related securities and high-yield bonds. Investment-grade corporate bonds experienced a more modest volume decline, and agency debt and mortgage-backed pass-through securities volumes rose on a year-over-year basis.

“Federal Reserve actions since the first of the year have had the effect of enhancing market liquidity. Over the past month, we have seen some improvement in market conditions as demonstrated by reduced volatility and a financial asset price rebound at the end of the quarter,” stated Kyle Brandon, managing director, research.

“Since the end of the first quarter, there indeed has been evidence of increased market stability supported by progress in bank loss recognition and capital replenishment. This is contributing to signs of renewed investor confidence, setting the stage for increased capital market issuance in the second quarter,” said Steve Davidson, managing director, capital markets research.

Looking ahead, SIFMA said that the credit market uncertainty continues to affect the outlook for all asset classes, and the credit market stresses have had global implications. “Although the prospect of an economic recovery should still be considered tenuous, the cumulative impact of the increased liquidity through a series of Federal Reserve and other central bank actions and the economic stimulus package appears to be having a moderating effect on the housing and credit crunch pressures,” it said. “The net effect suggests an increased probability of a pickup in capital markets activity over the balance of the year.”