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April 2004

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  • US treasury bond yields caught out many investors in the first quarter, tightening sharply below 4% in February and once more wrong-footing many who had been expecting that they would widen.
  • Money will, of course, remain cheap. Indeed, the forward market now forecasts that the Federal Reserve will not raise interest rates this year. But it has been cheap for a long time. It has already driven massive amounts into equities and reduced volatility to historical lows. In early January, the options put-to-call ratio reached levels indicating that no-one wanted to take out any insurance against equity markets falling. However, the recent turn in these indicators suggests that a wall of worry is now being built.
  • Leverage in the emerging markets is now approaching an all-time high, according to fund managers and sell-side analysts. But the structure of investment patterns in this asset class means a crash is unlikely. Felix Salmon reports.
  • Agence France Trésor was nervous about becoming the first issuer of euro-denominated inflation-linked bonds but it is pleased with the results. Now its regular linker issuance schedule is helping to bring certainty to the development of the curve. Katie Martin reports
  • A ground-breaking collateralized debt obligation offering a fixed level of recoveries targets investors who want a simpler structure.
  • Never let it be said that running a global financial services organization leaves you bereft of a sense of humour. Talking to investors in Singapore in February, Citigroup CEO Chuck Prince was reiterating his stance on future acquisitions. As Prince has publicly explained, the bulk of the $50 billion pre-tax net income that he wants Citigroup to be making in five years' time will come from organic growth. There will be no repeat of the Citicorp/Travelers merger of 1998, which was truly a transforming event for both sides.
  • If you think loan trading is colourless and unexciting, take a look at Thomas Duetoft, head of European loan trading at Dresdner Kleinwort Wasserstein, and his colleague Tom Johannessen, vice-president of loan trading.
  • Just a few months ago Peru looked a shaky bet for international investors. Now bondholders can breathe a little easier. Peruvian president Alejandro Toledo still has the lowest popularity rating in Latin America and economic growth is slowing but Peru's macroeconomic fundamentals are solid and in keeping with IMF demands. It all looked very different in mid-January. Spreads on Peru's debt widened by more than 100 basis points as investors wondered whether Toledo's two-and-a-half-year-old government was on its way out amid corruption scandals. Four ministers lost their jobs in just three months and Toledo, who has a popularity rating of just 9%, struggled to distance himself from corruption scandals.
  • The inflation-linked market has unexpected pockets of demand, few natural issuers and an unusually close relationship between derivatives and bonds. But it works. Banks now need to work out where the next set of structural demand will come from and how to position themselves to profit from it. Katie Martin reports
  • A bull-market in Indian equities last year sparked spectacular growth in the country's equity derivatives market, which began trading four years ago. Monthly turnover in equity derivatives grew almost fourfold last year and in February this year it accounted for two-and-a-half times the spot cash market turnover on the National Stock Exchange (NSE).The average daily equity derivatives turnover in January touched Rs150 billion (more than $3 billion).
  • Bank reform and the development of a properly structured mortgage market have been on the Russian agenda for years. Only now does implementation look set to begin. Ben Aris reports.
  • Last month, at Hong Kong's biggest party, the annual Rugby Sevens festival, an unusual trend emerged among Hong Kong's investment banks. The softer side of those hard-nosed masters of the universe was on display, manifested in the décor of their hospitality suites.
  • Liquidity poll April 2004
  • Asia's domestic wealth managers have to reassess their business models if they want to compete for the significant growth forecast for the market over the next three years.
  • Madrid has returned quickly to some kind of normality following the terrorist attack last month. There is still a steady flow of mourners to the sea of candles that commemorate the victims, but elsewhere in Atocha Station commuters were streaming from the platforms within a week of the attack, just as they did before. The market has responded in a similar fashion. Although the Ibex 35 dipped sharply following the attack and the election that came quickly after, within a week it was moving broadly in line with the other major world markets. The main reason for this is that despite the shock of the Socialist Party (PSOE) election victory and the animosity between the two main political parties, the country's political divisions are more about the war in Iraq and the style of the outgoing government than economic philosophy.
  • With volume in the EMEA equity capital markets up 132% this quarter compared with the first quarter of 2003, according to Dealogic, European equity capital markets appear to be in rude health. The IPO market in particular, which raised $7 billion through 39 deals, is at its strongest since the fourth quarter of 2001.
  • Americans have been having a lot of fun with, a new website that searches the public record for political donations. Euromoney, of course, was most interested in gifts from US bank CEOs. George W Bush came out well on top, garnering the maximum $2,000 donation from almost every CEO on the list. But there were surprises among the Democrats. Dick Gephardt pulled in more donations than any other candidate and Howard Dean got none at all.
  • As Putin's rule becomes more established, the political trend in Russia is firmly authoritarian and centralist. But that is not necessarily a barrier to liberal economic reforms.As Putin's rule becomes more established, the political trend in Russia is firmly authoritarian and centralist. But that is not necessarily a barrier to liberal economic reforms. Ben Aris reports.
  • Results of Euromoney's biggest ever credit research poll indicate that the development of relationships with continental European investors is crucial to success.
  • If Banca Intesa follows through on its interest in Garanti Bankasi, Turkey's banking market and the general economy could receive a big boost. David Judson reports.
  • Having suffered significant losses when the technology bubble burst, Scandinavia's high-net-worth individuals have become more demanding about products and services they expect from their banks. And with the number of wealthy predicted to rise, banks are being spurred to tailor their offerings to suit these clients. Helen Avery reports.
  • Its bonds have traditionally traded wider than Russia's, but with its potential for a diversified manufacturing economy and a resurgence in sovereign debt issuance, Ukraine is winning renewed interest from emerging-market funds. Nick Parsons reports.
  • Russia's dependence on energy exports - and high energy prices - is growing. The government wants to play a bigger part in fostering this golden goose and seems to have found a subtle way of doing so without renationalization. Ben Aris reports.
  • Delayed and inadequate reforms mean that Romania faces the prospect of failing to meet its 2007 deadline for entry into the EU. Guy Norton reports.
  • Anatoliy Shapovalov, deputy minister of finance of Ukraine and head of sovereign borrowing
  • Citigroup Private Bank has signed up golf legend Gary Player to act as an informal ambassador. As part of the multi-year endorsement, Player will represent the bank on his travels playing championship golf, and will "help to strengthen the firm's long-term relationships with some of the world's most successful families".
  • The capital-raising supermarkets available to companies in most advanced economies are a long way off for Turkey. The shabby state of capital markets is in large part an outcome of years of public sector financial chaos. Metin Munir reports.
  • This has been an exciting few weeks for Commerzbank. First it smiled its way through yet more poor results, while promising better times ahead. Days later, it sealed a merger with a retail bank. Then it awarded such low bonuses to securities staff that it risked losing talent. Here, senior executives discuss the bank's strategy, prospects for consolidation and the trouble with bonuses. Katie Martin reports
  • A new central bank governor with a firmer grip on exchange rate policy, a modest upturn in growth and a respectable equity market performance have increased confidence in Egypt's economy. But privatizations and banking reform are major uncompleted tasks. Nigel Dudley reports.