Crossing capital market boundaries

Just like the movies, the US capital market tends to get new releases before the rest of the world. Products may eventually spread elsewhere but not before the US market has had a good look at them, added some twists, and done a few billion dollars worth of business.

High-yield debt is a good example. It's at the cutting edge in the European fixed-income market, but for those who've been brought up on a rigid diet of bonds and loans the next generation of US innovations may take some digesting.

"In the US there is a much more fluid dynamic in the way that borrowers think about capital structure," says John Townsend, managing director at Goldman Sachs. Achieving that fluidity means crossing product boundaries, and the line between loans and bonds is becoming increasingly blurred.

Europe has now accepted the concept of high-yield, low-grade corporate credit but...