Corporate finance: The high cost of cheap money
DCM bankers battle the rise of the machines
Monetary policy has delivered global growth and booming asset prices. During the financial crisis and its aftermath, central bankers demonstrated admirable pragmatic radicalism. But monetary policy is not a cure-all, and another global downturn will present an even tougher test for policymakers.
Markets prepare for rising rates as Draghi recalibrates
When rates start to rise, the big action will be in credit markets. Banks are already staffing up amid efforts to unfreeze the market structure and make it easier to take on and lay off risk.
Bond custodians seek value from customer data
BNY Mellon and HSBC hope that, in an illiquid fixed income market with no registry of beneficial owners, their asset management clients may benefit from alerts about other counterparties wishing to buy or sell bonds.
Here is the surprising news about liquidity in the bond markets: it’s getting better.
Investors need new solutions as collateral becomes trapped and repo more volatile
A BNY Mellon study shows that big investors have finally accepted that the free-flow of collateral and ease of funding through repo they enjoyed pre-crisis will never return and they are now urgently seeking new ways to finance securities transactions that do not depend on bank balance sheets.
CEEMEA Eurobond sales top $133 billion in record first half
Spreads at multi-year lows as demand remains buoyant; Investors reverse underweight positions.
Spain’s bank rescue could make tier 2 less Popular
Quantitative easing has been the defining monetary policy innovation of the 21st century. With global economic recovery now seemingly robust, the challenge facing policymakers is to reverse this stimulus. This is likely to be fraught with danger, particularly in Europe.
Middle East: Saudi banks breathe as liquidity fears ease
The liquidity issues that have plagued the Kingdom’s banks for months appear to have abated. But a persistently low oil price and the impending generational reform programme mean that Saudi Arabia’s financial sector still faces some big challenges.
Bond markets: Two cheers for rising rates
Bond market losses that began in November with the sharp rise of inflation expectations for Donald Trump’s coming presidency continued towards the end of the year.
Bond market shoots first, asks questions later
Trump win upends bond market
Global Aggregate index yield jumps by 25bp in 11 days; $8.2 billion leaves US bond funds in one week.
Liquidity management stress causes bank-to-corporate tug of war
The decreasing liquidity in the corporate bond secondary market is worrying as it is key to price new issues
Argentina: Blejer credits Macri administration for Hipotecario’s global local currency bond
Turkish borrowers shake off sovereign downgrade
Eurobonds back after three-month post-coup shutdown; October supply tops $3.5 billion.
Saudi Arabia aims to capitalize on bond blowout
Though he was not involved in the deal, Bernd van Linder, CEO of Saudi Hollandi Bank, was delighted with the result. The influx of foreign money will help mitigate the liquidity shortfall of Saudi banks, he says.
Uneven corporate liquidity split creates alternative solutions
Banks are stepping up their offerings as the divide grows between corporates with plenty of liquidity and those struggling.
India: Masala debut at last
HDFC launches first corporate masala bond; others may be slow to follow.
News of the ECB’s corporate-sector purchasing programme shocked the market in March and has already prompted a stampede for paper among desperate investors before the central bank has purchased a single bond. Bankers and investors are already complaining that the programme will not have its desired effect.
ECB's corporate sector purchase programme (CSPP): what you need to know
Euromoney’s round-up of the European Central Bank’s CSPP, including the eligibility criteria and process.
Peru: Segura eyes further regional integration
Mila just the start, says Peru’s finance minster; pan-Andean market liquidity coming.
Brazil looks to join Argentina’s DCM party
Petrobras opens way for strong Brazilian pipeline; Argentina sovereign praised for helping deal flow.
Negative interest rates turn conventional lending dynamics on their head and, bankers say, threaten the liquidity, risk and maturity transformation that lie at the heart of credit intermediation. In other words, they put the entire ethos of traditional banking in peril. Have central bankers misunderstood how the credit transmission channel works in their desperate attempts to stave off deflation?
Bank holdings: Keep banks in the loop
Islamic banking needs to break out
Sideways: ECB pixie dust fails to revive credit trading
Middle East: Scale of Gulf-wide credit crunch comes clear
$94 billion coming due by end-2017; Bahrain pays up after downgrade.
Capital markets: Swap spreads signal market failure
Bond market liquidity traditionally relies on banks acting as market makers: being willing to act as shock absorbers and hold treasuries during a sell-off such as that recently witnessed by foreign central banks. Three things are necessary for them to be able to do this...
Latin America: Will 2016 be the year of euro DCM?
Volatility slams international DCM shut; choppy access but strong liquidity in 2016.
Investment-banking volumes in emerging Europe have fallen to their lowest levels for more than a decade. Some international banks are withdrawing capacity, while there is little sign of a pick up in the capital markets. So why are some of the universal banks still making positive noises?
New specialist liquidity providers are nibbling away at the share of the big universal banks in more and more parts of the FICC markets. In swaps, government bonds, foreign exchange, credit, and in securities financing and repo, new entrants are on the march, stepping up to fill the gaps left by the retreating banks. Tech savvy, led by quants and data engineers rather than the expensive traders sitting on the scrap heap of most banks’ inferior tech, the new entrants now just need people with the skills to win over large numbers of customers.
Banking: Providing liquidity to liquidity providers
In all financial markets, the biggest customers for liquidity providers are often other dealers.
Macaskill on markets: How to game a Draghi Put for corporate bonds
European Central Bank president Mario Draghi has been dropping further hints that he is considering unconventional measures to combat deflationary pressures in the region. This sets the stage for potential central bank buying of European corporate bonds, which in turn raises the question of whether there will be opportunities for nimble investors to game a new ‘Draghi Put’ for corporate credit.
Middle East liquidity crunch starts to bite
Commercial Bank of Dubai pays up; Gulf Investment Corporation cancels deal.
Banks chase dwindling green bond opportunities
HSBC latest to pledge green bond investments; Barclays hits £1 billion target and promises more.
Gulf markets: the liquidity well runs dry
The drop in the oil price has combined with a general lack of liquidity to put issuers from Gulf states in an unfamiliar position. There may be no need to fear a crunch, but the region’s issuers must get used to the fact that they will have to pay up to raise capital.
Macaskill on markets: Reasons to be fearful – the big three
The return of market volatility in late August put a focus on asset managers, with investment banks for once ceding the spotlight during a period of turmoil. There will surely be some bank trading mishaps, but the main threat to revenues is likely to come from diminished demand for investment products rather than dealing room blow-ups.
Bond markets: Resilience underscores European HY maturity
Bankers upbeat on issuance; inflows diverge with US.
Macaskill on markets: Liquidity drought’s conflicted Cassandras
It is now a mark of the serious individual in finance to issue a dire warning about the threat posed by a lack of market liquidity. What climate change is to the young liberal (or young person), so liquidity has become to the ageing plutocrat, secure perhaps in his own billions, but with a furrowed brow as he contemplates the potential havoc that could be wreaked by diminished liquidity.
Government bond sell-off fuels liquidity fears
Investor concerns mount as liquidity fragments; banks seek to aggregate orders.
|Reverse yankee issuance: View from the buy side|
"The EU system is still driven by bank lending rather than the capital market, and the ECB’s massive asset purchase programme is indirectly diminishing the supply of high-quality, positive-yielding bonds and thus creating higher demand for corporate bonds. Relative to the US, Europe is a scarcity story."
The banks winning from a broken bond market
Fear is spreading over the financial system’s vulnerability to increased volatility stemming from a broken and illiquid credit bond market. All participants agree the secondary trading is undergoing fundamental change as the big banks that used to make markets withdraw their capital, but no one has a vision for how it will alter. A new breed of banks, though, is making headway against the headwinds.
Curtailing communication between banks and investors may have untold consequences in bond markets that are already showing signs of episodic high volatility amid low volumes and shallow liquidity. It’s not a topic that has generated much coverage yet. But regulators could be setting up a very unlevel playing field.
Bond trading: Information trumps execution
Bond market liquidity: Pre-trade info is key for investors
Bond investors may need to travel down darker paths to cope with reduced secondary market liquidity.
Last month’s volatility provided a worrying reminder of how illiquid the bond markets have become, how piecemeal has been the response of traders, investors and issuers and how concerned regulators now are.
Long-dated bonds: Apple goes pear shaped
Long-dated bonds collapse on tapering talk; Volatility underscores need for new thinking on liquidity
June 2013Wall Street was close to panic as fears of rising US Treasury yields brought capital markets to the brink of closure.
The day of the hybrids: Is the flowering corporate market as attractive as it seems?
|Primary debt survey 2013: Bankers feast as investors are left with crumbs|
Activity in primary debt capital markets has never been greater. DCM desks are having record years. Investors are faced with a quandary: stay in, and stay with the rally; or try to get out, before the market turns. But those considering the latter option may be caught out. Even borrowers are getting worried about liquidity in the secondary markets.
‘Rigged’ credit markets a yield trap for the unwary
QE has created ‘drugged’ environment; prime risk is that of economic recovery.
Sovereign bonds: Do markets need a risk-free rate?
With concern growing over the credit risk embodied in many sovereign bonds, fixed-income investors need to think harder about how they assess risk.
Bond markets: The threat from rising rates