US debt markets: Yankee supply jumps
European issuers tapping the US capital market are increasingly using the extendible note market. They are driven by a need for liquid markets and relatively low appetite for the regulatory complications involved with 144a SEC registration
Borrowers head west to diversify funding sources
“I would say that the theme this year has been on the high number of European banks that have gone to the US. Every European issuer was previously focused on the euro market – building their curves, establishing their investor base. They have all now done that. I wouldn’t say that they are bumping up against any kind of lending limits but let’s say that they’ve explored the boundaries of the euro market,” says Alan Patterson, European head of the financial institutions group at Citigroup.
Patterson points to significant market consolidation as one reason for this trend – many banks are much bigger now. For example, UniCredit and Santander both now have $20 billion borrowing programmes – far in excess of what they had five years ago. So their need for diversification is that much greater. Such currencies as yen, sterling, or Australian or Canadian dollars provide some variety but very little real opportunity to raise significant volumes.
It is this diversification rationale that explains why the volumes in the US extendible market have jumped dramatically, from $57 billion to $72 billion year to date, according to Merrill Lynch.