U.S. corporations issued $93.7 billion of medium-term notes (MTNs) in 1996, down from a record $98.9 billion in 1995 (table 1.A). The slower pace of issuance is entirely attributable to nonfinancial firms, which sold $11.7 billion in 1996, $7.8 billion less than in 1995. Issuance by financial firms rose $2.5 billion to $82.0 billion, a record for these firms. A total of 165 firms sold MTNs in 1996, the fewest since 1990 and 30 fewer than in 1995 (table 1.B). The number of nonfinancial issuers, which dropped by one-third, fully accounted for this decline; the number of financial issuers increased by 9 to 87. Since 1983, when the Federal Reserve began collecting these data, 528 companies have raised funds in the MTN market, including 206 financial companies and 322 nonfinancial companies. During 1996, total MTNs outstanding rose $19.8 billion to $287.3 billion (tables 2.A and 3). As of year-end, 411 firms--126 financial and 285 nonfinancial--had MTNs outstanding (table 2.B).

The corporations that issued MTNs in 1996 continued to have high credit ratings (table 5). More than 99 percent of the MTNs issued last year had investment-grade ratings. Single-A-rated issuers were again most common and accounted for 65 percent of total issuance. Only four firms with speculative-grade ratings issued MTNs last year. Because the volume of speculative-grade issues has always been small, outstanding MTNs also have high credit ratings; 98 percent of outstanding MTNs were rated investment-grade at year-end 1996 (table 6).

The MTN market accounts for a sizable share of intermediate- and long-term borrowing by U.S. companies. One measure of the MTN market share is the volume of MTN issuance as a percentage of total public issuance of investment-grade debt (MTNs plus straight corporate bonds). As shown in table 7, MTNs were less important in 1996 than in 1995, as the issuance ratio dropped 4 percentage points, to 43 percent. The reduced importance of MTNs was particularly pronounced among nonfinancial companies, which reduced their relative usage of MTNs for long-term financing by 10 percentage points, to 16 percent. Given the reduced importance of MTN issuance, the ratio of MTNs outstanding to the amount of public long-term debt outstanding (MTNs plus public corporate bonds), another measure of the MTN market share, fell 1 percentage point, to 18 percent (table 8).

The Division of Research and Statistics of the Federal Reserve Board obtains these data from a survey of U.S. corporations that borrow in the public MTN market. The reported figures do not include borrowing in the "Euro" markets or the private placement market (both traditional issues and securities sold under SEC Rule 144a are excluded). Moreover, the survey does not include offerings by foreign corporations, sovereigns, supranationals, or federal agencies. The figures include MTNs offered by bank holding companies but exclude deposit notes and bank notes offered by banks because these securities are exempt from SEC registration under section 3(a)2 of the Securities Act of 1933. The Federal Reserve collects these data to improve its estimates of new securities issues of U.S. corporations, as published in the Federal Reserve Bulletin, and to improve estimates of corporate securities outstanding as shown in the Federal Reserve's flow of funds accounts. The Federal Reserve obtains information on new programs from announcements of SEC Rule 415 registrations and contacts with MTN agents. It regards as confidential the disaggregated information provided by individual companies.

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