The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.
OPINION

Debt markets: Bring back the syndicate!

The boom in the bond markets has quickly brought back some unwanted old habits.

It did not take long for the bond syndication process to revert to type. A year ago selling new issues was dangerous. The damage to an underwriter’s reputation from failing might be serious, although not as serious as for the prospective borrower, which would then need to fend off accusations that it had no access to the capital markets.

Failure to deliver a deal was not an option, which meant that syndication was reminiscent of days long gone. Cooperation between bond managers was crucial to success, as was persuading a number of core investors to agree to purchase the bonds before a deal’s official launch. Proper bookbuilding therefore returned. Syndicate structures started to change too, with certain frequent issuers implementing selling groups that played to niche domestic investor bases.

Then came the deluge of investor money during the course of the year. A rarely identified but substantial flaw in the capital markets occurs when there is a big mismatch between supply and demand. When demand outweighs supply, lead managers can become lazy. It is hard to blame them. Why should they search out pockets of demand in hidden corners? Is there a point to having an enlarged selling group when investor demand is overwhelming? There is little need to think about growing the investor base when even the biggest asset managers are allocated only a small proportion of bonds during book building.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree