We have a new government at the federal level, a Coalition government that has promised a new inquiry into Australia's financial system. The inquiry is expected to be wide ranging, covering the banking system, superannuation, and what is fast becoming a perennial subject for inquiries - the corporate bond market.Most inquiries to date into the corporate bond market, whether government or industry initiated, have chosen to focus on developing a retail market. The prevailing view is that the wholesale market is for the big boys and they can look after themselves.While the success of initiatives implemented to develop the retail market can be debated, no-one has addressed the fundamental problem of the domestic corporate bond market, whether wholesale or retail, and that is confidence. While confidence is improving, issuers have long argued that they cannot be certain of a successful bond issue in terms of both volume and price; they doubt investor demand. As a result, term debt in the form of a syndicated loan is often preferred.The extent of this doubt, and its impact on the corporate bond market in the second half of the last decade, is dramatically illustrated in the chart below.The impact of syndicated loans on the development of the corporate bond market is typically interpreted as the major banks using syndicated loans to out-compete the corporate bond market. This was one of the conclusions of the Australian Financial Centre Forum in its 2009 report "Australia as a Financial Centre - building on our strengths".However, the enthusiasm of the major banks for providing syndicated loans was not a response to any competitive threat from the corporate bond market. Don't forget that the major banks also sit at the top of corporate bond league tables.The massive increase in the volume of syndicated loans provided to ASX-listed Australian companies in the second half of the last decade was a response to the competitive threat of a significant increase in international banks entering the syndicated loan market. The market has few barriers to entry or exit and the major banks were fighting to maintain their corporate relationships. Given a nascent corporate bond market, advising CFOs and corporate treasurers that using the syndicated loan market would minimise their execution risk was an easy sell. A designated syndicate of banks would provide a given volume of funds, at a set price and within a specified period of time. Yet my own research, as part of a now completed PhD, shows that the domestic corporate bond market is a much stronger performer than is commonly recognised.The study comprised a sample of corporate bond issues and term syndicated loans taken out by listed companies over the period from 1996 to 2007. Thus, the study is pre-GFC, when credit spreads for borrowers were much tighter than they are today. Controlling for differences in credit quality, issue size and term to maturity, it was found that had all borrowers used corporate bonds the average credit spread would have been 59.8 basis points per annum. If syndicated loans