The proliferation of local private bond issues which characterised 2009 seems set to continue this year. A fair number of bonds have already been issued to date and more have already been announced for June. The government complemented the process with very substantial issues of its own. The details are practically the same for both the public and the private sector.

Like all governments, ours has maturing stock which it must roll over. It also continues to run a fiscal deficit which has to be financed with new stock issues.

On its part the private sector too is replete with companies that have stock issues coming up for maturity, or which can be redeemed between now and two years time. It pays such companies to roll over their bonds now, when interest rates are lower than the carrying rate of their existing bond holdings.

Where bonds have matured it is not a question of whether it pays or not to roll over. Companies are obliged to attempt to do so since they do not have the liquidity required for them to redeem bonds and at the same time finance their current and capital requirements.

They also go down that route not least because the lending banks are not in a mood to expand their loan portfolios unduly. Also, a number of companies are attempting to raise a reasonable margin of capital above that which they have to roll over to enable them to carry out fresh capital investment. In some cases the new investment is relatively modest. In others it is very substantial.

Private companies still account for the banks' very large lending portfolio. Nevertheless the lending banks are much more guarded than in the past when it comes to meeting new requests for finance. That is not to say they have pulled their shutters down, but they are not rolling them up in full, either, especially when it comes to lending for anything in which property purchase and/or development plays a part.

It is not for nothing that the major banks have been increasing their collective (general) provisions against bad or doubtful debts, although they report a much reduced requirement for specific provisions (in respect of particular clients). They speak positively but are not completely at ease with the domestic economic situation, depending as it is on what goes on in the global economy, where turbulence prevails.

Happily for the government and private corporate borrowers the risk appetite of Maltese private lenders for local stocks and bonds remains high. That is due to the fact that interest rates available on bank deposits are still very low, at least in nominal terms. As well as to the fact that Maltese savers seem to be coming increasingly chary to invest in foreign sovereign and corporate bonds. Not without good reason, too.

Many investors have been bitten in the past, in South Africa and in Latin America in particular. Today they would be following the dark cloud that hangs over bonds because of what has happened to Greece and, less so, to Ireland, Portugal and Spain.

There is a growing perception that it is safer to lend to the Malta government and to domestic corporate borrowers, than to purchase foreign bonds, where the yield on the safest sovereign among them remains much below the preferences of lenders.

There is, therefore, a convergence of interests between would be borrowers and lenders. The convergence is mirrored in the fact that all the bonds issued last year were oversubscribed. That too has been the experience so far this year, though one might expect public liquidity to be drying up, given the tax and prices squeeze on consumers and a historically low propensity to save.

The trend continues. The heavy stock issue made by the government, with the offer closing a week ago, was also oversubscribed. Lending bank wariness regarding new lending is far from being matched by private lenders, and corporate borrowers in particular are taking full advantage of that.

These developments have helped to bring about some broadening and deepening in Il-Borża, our stock exchange. Paradoxically, they may also have hindered another perhaps more important development, which is for more Maltese private companies to open up their shareholding to investors, either by offering part of their existing shares or creating new ones for private subscription.

The typical company model is not so much that of the family business as it used to be until not so long ago. But then, neither has it changed that much. Companies which are happy to tap the bond market are extremely reluctant to raise capital by issuing shares, or by increasing the share float where one exists.

It could be that the impact of the recession on profits remains such that it would not be easy to persuade investors to take the ultimate risk of investing in shares. Yet in addition to that there remains the reluctance of companies which started off as family enterprises to change their mind set.

Time will tell what will make them change their appraisal and move towards a situation where a fully fledged capital market starts to take real shape. For the time being it is still a considerable distance away.