WORLD financial markets largely shrugged off an upturn in interest rates in early 1996 as currency stability and a favourable inflation outlook encouraged the issuing of international bonds, the Bank for International Settlements (BIS) said yesterday.

Liquidity in international banking and financial markets remained high in the first quarter, with activity in the syndicated loan market soaring to new highs on the back of record volumes of corporate mergers and acquisitions.

The total volume of new syndicated loan facilities in the first quarter rose to a record $98.9 billion (£62.76 billion), 11.4 per cent higher than the $88.8 billion in the 1995 fourth quarter, BIS said in its quarterly report on banking and financial markets.

Primary activity in the international securities market was also unprecedented, propelled by a growing need for funding by financial institutions in the face of reduced supply from other sources, and the increasing acceptance of asset backed securities outside Britain and the US.