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June 2013

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  • "Corporates that issue hybrids get part equity treatment which enables their senior bonds to get a higher rating or for their rating to be protected. But another way of looking at it is that the corporate now has more debt so the probability of default is higher. This is a ratings and rules arbitrage. If you are going to play in this market you had better understand the motivations behind that arbitrage"
  • Last month, poor first-quarter growth figures showed the French economy entering triple-dip recession, while the EU postponed until 2015 the 3% of GDP fiscal deficit target, at the same time increasing pressure on the government of François Hollande to enact structural reforms of in pensions and the labour and product markets.
  • Euromoney received votes from 1,107 investors nominating the best borrowers in the international debt capital markets, a ranking traditionally dominated by the highest-quality sovereign borrowers, supranationals and agencies and frequent corporate issuers. The biggest riser in the ranking this year, up to 11th position from 33rd last year, is the European Financial Stability Facility (EFSF), which funds the debt issued to bail out Greece, Ireland and Portugal.
  • Activity in primary debt capital markets has never been greater. DCM desks are having record years. Investors are faced with a quandary: stay in, and stay with the rally; or try to get out, before the market turns. But those considering the latter option may be caught out. Even borrowers are getting worried about liquidity in the secondary markets.
  • The young up-start is giving bigger Nordic investment banks a run for their money. The firm’s CEO reckons its size and a commitment to local research have been an advantage in adapting to the changing climate of the region’s capital markets.
  • I am sure Jamie Dimon considers the hoo-ha about splitting the chief executive and chairman roles at JPMorgan to be an over-reaction.
  • In his last public appearance as the head of investment banking at Barclays, Rich Ricci thanked clients who have stuck by the bank in the aftermath of the Libor scandal by inviting them to a performance of the wonderful Conor McPherson play, The Weir, at the Donmar Warehouse in London’s Covent Garden.
  • Dominique Strauss-Kahn, or DSK as he likes to style himself, has made an unusual comeback to the economic scene. After a two-year hiatus following charges of sexual assault in a swanky New York hotel room, Strauss-Kahn has decided to take things back to basics. In South Sudan.
  • Worrying news from the world of academia: a professor at Warwick Business School has found that some investors refer to stocks 'almost as if they were lovers'.
  • "Investors are puking all over that deal"
  • Municipal and regional governments are trying to build new investor bases in the teeth of the eurozone crisis. And they’re having success, not least in the Nordic region, which could provide a template for other parts of Europe.
  • The popularity of some seemingly high-risk frontier bond issues suggests investors are driven by the need to fill index allocations rather than issuer quality. It also suggests the traditional market-capitalization approach of indices needs reconsideration.
  • One impact of the current economic and regulatory environment is that correspondent banking – the provision of services to other banks to enable them to service their own clients – is facing a shake-up.
  • Competition in US debt capital markets remains fierce despite pressure on European banks to retrench from capital-intensive business lines. Faced with regulatory and funding headwinds, European banks insist they are staying put, and other non-US banks are joining them in the world’s biggest debt market.
  • Returning to the category of imperial CEOs, most would agree that Bob Diamond, the former Barclays chief, was an earlier poster boy: a Do-it-my-way-or-take-the-highway kind of boss.
  • Government considers reforms, including nationalization; Private managers reject profiteering claims
  • What comes first for transaction banks? Their financial institutions clients want them to help meet new challenges – especially around regulation and depressed earnings – through innovating new products. But the big cash managers find most of their technology budgets focused on dealing with regulatory burdens.
  • There is just about enough global growth activity to sustain growth-dependent assets. But stagnating Europe remains the weak link that could disrupt peaceful progress.
  • 15 companies slated for privatization; Eyes on Russian, Turkish buyers
  • Banks need to be better regulated. But a financial transactions tax is more than wrongheaded. As currently formulated, it would be hugely damaging.
  • Bloomberg brought a knife to a gunfight when it tried to pry information out of Goldman Sachs by using details gathered from the data and media firm’s terminals about the bank’s employees. An enquiry by a Bloomberg reporter about whether a partner had left Goldman, given that his terminal was not in regular use, set alarms bells ringing at a bank that has a well-deserved reputation for paranoia.
  • A seasoned source told me a few months ago that Diamond’s tenure was abruptly terminated because "He was foreign! In this new era of heightened public scrutiny and domineering regulators," the source sighed, "your cultural values and background have to be aligned with those of the national authorities. If your face doesn’t fit and there’s a setback, you are out. It happened to Bob and it happened to Vikram Pandit at Citi. Anshu Jain, over at Deutsche, needs to watch out."
  • The country’s recent sovereign bond might or might not amount to a return to full market access, but it is certainly a positive development. Its progress on its economy and the state of its banks is equally crucial.
  • Corporate hybrids are booming, thanks to surging appetite from investors in Asia and Europe – and potentially even the US. These deals offer a great pick-up over anaemic senior spreads. But are buyers turning a blind eye to the risks in their hunt for yield?
  • The country’s rapidly growing SMEs urgently need funding avenues other than those provided by the country’s banks. Some new options are beginning to emerge to solve that conundrum.
  • With fresh signs of political and legislative progress, there is a renewed sense of optimism around the country after more than a year of political posturing that cast a pall over the nation and put the brakes on foreign direct investment that sent asset prices tumbling.