Goldman Sachs
Several banks have strong short-term debt franchises. Deutsche Bank, for example, is very impressive in Europe, and Merrill Lynch does a lot of business in the US. But Goldman Sachs still has by far the most consistent commitment to the full range of short-term debt products on a global basis.
It has global outstandings of $180 billion in straight CP and was the number one ranked CP dealer on TradeWeb for the full year in 2003 and the first quarter of 2004.
?We?ve been fortunate in having been involved in some of the most innovative ideas this year,? says John Delaney, head of European money markets origination at Goldman Sachs. ?For instance, we worked on the introduction of extendible ABCP in the euro market in 2004 with a new extendible tranche of funding for ABN Amro. The extendible nature of the note means that the issuer can optimise its use of back-up liquidity. We?re also the only non-Japanese dealer on GECC?s ¥200 billion [$1.86 billion] Japanese CP programme and we have been effective in distributing those notes.?
There have also been innovative new developments in Goldman?s repo business over the past 12 months. In 2003, the bank merged its funding functions onto one platform, which has brought closer collaboration between its fixed-income and equities business in how the bank finances its assets. This has also meant that a wider range of products are available to external investors because the bank can now lend a broad range of debt and equity securities, tailor making higher-yielding products to those that want them and moving away from just using high-quality government bonds as collateral.
Goldman is doing a lot more third-party repo business as it can now pledge Japanese, European and US collateral to European and US investors. ?Having the ability to transfer assets ? including bonds, equities and less liquid assets ? across a global platform, and bringing the collateral to the investors, enhance the variety of our customer offerings,? says Olly Benkert, co-head of the European repo desk.
Delaney explains that the repo business feeds other parts of the short-term debt business, such as two-year extendible notes, a new innovation at the bank in the past year. These are marketed to securities lenders and not the 2A7 money market funds as traditional 13-month extendible notes are.
Goldman Sachs did the first two-year notes extendible out to 10 years with a $750 million transaction for SLM Corp last December, which was subsequently increased to $1 billion. Since then there have been nine issues of this type, and Goldman Sachs has lead managed seven of them.
