PROCRASTINATION IS THE thief of time. Carpe diem. For centuries, poets, statesmen and wits have warned of the dangers of delay and urged us to act now. But when it comes to issuing debt, banks are devising new tools to help corporates put off until tomorrow what they could be doing today. If corporates respond, they will be moving closer to taking trading positions in their own credit and using credit derivatives as banks and investors do.
The logic behind this is simple. Credit spreads are tight. But if issuers pre-fund and put the money raised on deposit, they pay the cost of carry and risk upsetting equity analysts and creditors, neither of whom likes to see borrowers with large amounts of spare cash.
So, can issuers capture current spread levels for their future funding without paying the cost of carry or grossing up their balance sheets? The banks say...
