Like equities, bonds also achieved record highs in increasingly tricky markets. In SA, bonds and related instruments (debt securities and interest rate-derivative products) are primarily traded on the Bond Exchange of SA (Besa). The JSE can also facilitate trade in bonds on its Yield-X platform, but generally Besa is thought to be the market leader and also the primary market participant.

A bond is a debt security that requires its issuer to repay its holder the loan plus interest at an agreed maturity date.

Besa's primary listings grew by 33% (or 242 new listings) year-on-year to a total of 104 issuers. The exchange boasted a total of 967 listings by the end of 2007. The value of total listings increased by almost 8% in 2007. And this is despite a high interest-rate environment - interest rates have an inverse relationship to bonds.

This robust trade is good news for Besa, which demutualised in October 2007. It was previously a "club" comprising banks, issuers, asset managers, brokers, and interdealer brokers (IDBs). Demutualisation converted it to an unlisted public company. The capital raised will provide it with the resources required to pursue new ventures and expand its products and service offerings.

Aside from its important regulatory and market development functions, Besa facilitates bond listings and bond trade reporting and matching. Its interest-rate derivative offerings include bond futures, forward-rate agreements, vanilla swaps and standard bond options, allowing both the term and the instrument to be listed.

The bond exchange also provides useful indices that serve as benchmarks for market participants. These include the total return indices, the government inflation-linked bond index, the hedge fund index and credit indices.

Other 2007 highlights included Besa's first exchange-traded fund, and record turnover on the secondary market of R13,8 trillion.

Corporate listings increased dramatically, showing growth of 44% (or 246 new listings) in 2007. Their value therefore increased to R267bn.

These listings now account for a third of total issues and are mostly dominated by financial institutions and securitisations.

But despite the increase in corporate listings, the numbers reflect a favourite industry bugbear - there is no capacity for them. There is a small amount of secondary-market activity in corporate debt.

But the price discovery of corporate bonds is regarded in an unfavourable light by other market participants, and this may be having an effect on appetite for corporate bonds until a solution is found. Pricing is most inefficient in the secondary market, where it is based on Jibar (the Johannesburg interbank agreed rate) plus a premium based on market sentiment and credit rating.

The credit crunch and widening credit spreads have worsened sentiment, and therefore corporate listings should remain subdued.

Besa's calculations show turnover volumes placing it fourth-highest globally in 2007, as reported by the World Federation of Exchanges.

Besa's 2006 financials reported a net profit of R719 000 (up from a net loss of R3m in 2005). Said Besa CEO Garth Greubel at the time: "Besa's financial model has been cost recovery. We have no reserves or big assets and we have passed on gains to our membership."

Besa started 2008 with a bang. Big parastatal paper has come to the market through Eskom, the Development Bank of SA and the water authorities. Already this has led to an increase in primary listings of 7,5%.