DESPITE A FLURRY of new corporate bond issues last month, debt capital markets teams haven't exactly been run off their feet since the middle of the year. It's been tough to get stand-alone corporate deals done. And bankers have had a lot more time to get in front of corporate clients and pitch ideas about other funding options.
In the light of extreme volatility in public bond markets, corporates have compelling reasons to fund themselves through EMTNs. Most cannot be choosy and need to be able to take advantage of pockets of investor demand, however small or large, opportunistically. They cannot hang around for the documentation to be completed to do stand-alone public issues.
There are some bright spots. Money-market funds looking to pick up yield have bolstered demand for public MTNs of one to two years' maturity. Yet overall corporate deal flow in EMTNs is well down on last year and was particularly low in the six months after June. So competition to present interesting deals is increasing.
Organizing structured MTNs for financial institutions is a good revenue earner for banks but investors have little or no appetite for taking credit and structuring risk from corporate issuers, particularly when more and more are being downgraded.