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Taking more from a shrinking market

Last year was marvellous for the debt markets. Despite all the setbacks, such as the collapses of Enron, Argentina and others, frequent interest rate cuts and huge corporate financing programmes kept the banks in clover. This year doing deals will be much tougher. Corporates have less borrowing to do and interest rates may rise. Banks will have to fight harder than ever for market share to keep revenues up.

Niall Cameron

Most investment bankers were delighted to see the end of 2001 - a truly terrible year in which many lost friends and colleagues in the World Trade Centre. Work itself provided little consolation. M&A and equity capital market volumes declined precipitously, robbing firms of earnings in their highest-margin businesses. Most cut staff and bonuses. Those investment bankers who have held on to their jobs returned to work in January praying that an economic recovery would reignite the equity markets and prompt corporations to finance new investments and mergers&acquisitions. Most of them are looking forward hopefully to 2002 on the simple grounds that it can't be as bad as 2001.

There was one group of bankers, though, that didn't want 2001 to end - the primary and secondary debt markets teams that profited mightily last year from a happy combination of falling interest rates and surging corporate new-issue volume.

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