Bond overview - Europe's battle of the bulge
The biggest opportunities for growth and profits in the fixed-income world in 2000 are in Europe. Corporate bonds, high-yield, securitization will flourish. There will be a fierce contest, as all manner of intermediaries - commercial and investment banks, Americans and Europeans fight for a place in the bond bulge bracket. According to the US model this should guarantee the eventual winners a honey-pot combination of high market share and profitability. The competition to hire the people - high-level originators, salesmen expert at advising institutional investors strategically, skilled and market-savvy credit analysts - will become ever more intense. Peter Lee's report heads a series of articles on the future of fixed income
Firms are each starting with different competitive advantages. Bank lenders will trade on their old lending relationships, M&A advisers on their strategic partnerships with issuers. And firms will seek to import each other's skills. The European firms, unused to a large domestic credit bond market, will copy American techniques, such as devising index products as a means to tie them to European bond investors who are being measured for the first time against new bond indices. The more ambitious European firms will renew their efforts in the dollar fixed-income markets in Europe and America. The Americans will bulk up their sales and origination teams in Europe, attempt to reach down to second-tier corporate issuers and will try to portray themselves more as entrenched domestic firms in Europe, with strong local managers, not mere collections of product specialists reporting to New York chiefs. Every firm will seek to get an edge by embracing the internet. Some will make dreadful mistakes. But for the winners, rich prizes beckon.
Last year, the new single currency was the focal point for powerful forces that began to create a new debt capital market in Europe based on credit.