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Cracking into sterling

Attractive margins on new-issue business in the sterling corporate bonds sector are encouraging European and US banks to enter the market. But gaining and maintaining a foothold in this cliquish arena could prove costly

Gordon Brown: has put off a decision on the UK's entry into the eurozone for at least a year

THE STERLING CORPORATE bond market is a strange beast. It is small, quirky and dominated by a cosy group of investors and the banks whose traders and sales people have befriended them. One banker goes so far as to describe it as a cartel. It is certainly a tough nut for the outsider to crack. Yet since June, when UK finance minister Gordon Brown deferred making a decision on the UK's entry to the eurozone for a year at least, several brave continental European and US banks have decided that they want to increase their push into the sterling bond sector.

The drive to find new lucrative revenue streams in an ever more competitive European bond market is laudable, but it is not at all certain that they will be able to infiltrate the clique, let alone make any money.

The banks that are successful in this market already are dominated by UK players that have lending relationships with sterling customers to snap up the primary market business and or historical expertise in sterling sales and trading.

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