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Capital Markets

EU debt markets: Will the bank bail-in make bond investors bail out?

The primary debt markets in Europe seem to have come to terms with the threat of a peripheral sovereign debt restructuring. But proposed regulation that will require bondholders to be bailed in when banks fail might be the last straw for some buyers in the FIG market. Louise Bowman reports.

GIVEN THE YEAR that their debt markets have just had, European FIG bankers could be forgiven for feeling slightly anxious about their business. In the first quarter of this year senior unsecured FIG issuance was down by 22%, global subordinated was off by 10% and the European bank sector reportedly faced a €1 trillion financing hole. But when Euromoney visited some of the most highly regarded teams in this year’s primary debt survey in May, the mood was positively upbeat. "This is one of the most exciting and interesting periods in the debt markets I can remember," enthused Martin Egan, global head of fixed-income primary markets and origination at BNP Paribas, which ranked third overall in the primary debt survey, up from fourth last year.

What about the sovereign debt crisis? What about looming regulation? "The world has changed and we need to digest what is going on at a macro level," he concedes. "Growth dynamics are not going to suddenly turn around and the historical boundaries between developed markets, emerging markets and growth markets have broken down. Opportunity abounds."

That opportunity can be tough to spot in a period of almost unprecedented uncertainty.