Carnage in the Euromarkets has left them barely functioning. Only a few investors retain an appetite for the fray. Underwriters are trying above all to stay out of trouble. Most borrowers are searching in vain for credit at palatable prices. Amid the wreckage of emerging-market portfolios and sky-high spreads on many corporate bonds, an elite of multilateral banks and state agencies forms almost the only group able to find attractive financing. Overall in the Euromarkets, says Andrew Pisker, global head of bonds at Paribas, "there's very, very little liquidity". Top triple A rated names are an exception. "At a price, you can always sell this paper," he says. "That can't be said for many issuers in current markets."
But even these agencies and supranationals feel frustrated by the premiums they are having to offer in a market that won't or can't recognize their true credit quality. They are attempting to complete their 1998 funding programmes by improvised and contorted methods. Public auctions of large, liquid bonds, ubiquitous before August, have become rare. This is partly because investors fear further chaos. But according to some observers, it is also because loss-hit investment banks are not doing their job properly.