Comment - Tuesday View
Latest Tuesday Views
At $1.5bn, the order book for Turkiye Finans’s $500m sukuk return on Tuesday was not to be sniffed at. But demand didn't reach the dizzy heights of this year’s other dollar sukuk deals, and that is thanks to the market’s last issuer, Damac Real Estate Development.
High yield issuers just keep on flexing their muscles, showing investors where the power in the market lies. The latest totem to fall to the extreme supply-demand imbalance is call protection, now down to a new low of 1.5 years.
Russia’s domestic bond market is not deep enough to cover all issuers’ total refinancing needs, but getting it working again to show that issuers do have access to funding has its own value.
Bond investors seem desperate to get their hands on anything other than Chinese property and frontier market sovereigns are stepping up to the plate. Recent and lauded sovereign bonds from Sri Lanka and Pakistan have provided much needed diversification and appetite for frontier credits continues to be rife. Bangladesh has been waiting in the wings and now is the perfect time for it to take the plunge.
A bigger bank is not necessarily the same as a stronger bank, which is why the Bank of Italy’s draft proposal redefining which borrowers can issue covered bonds should be applauded.
The European resolution mechanism should be agreed next week. But the nature of resolution means that any agreement less than 100% sound is not fit for purpose. Fault-lines in resolution planning are like holes in a bucket — if they exist at all, the bucket won’t work.
The Islamic Republic of Pakistan, rated B- / CAA1, will consider it a great result if it can re-establish a five- and 10-year international bond curve this week – following a seven year hiatus – by pricing close to higher-rated Zambia. But for a country with Islamic in its name, with a growing Islamic banking industry and with Islamic finance globally gathering momentum, it would be an oversight if it does not also re-establish a sukuk curve, and soon.
India's cash-strapped state-owned banks breathed a sigh of relief last month when the country's central bank pushed back its rollout of Basel III by a year. But the move fails to reward the better functioning private sector banks and takes India a step further away from a more efficient financial system.
The UK government now owns a 24.9% stake in Lloyds and a 30% stake in Royal Mail. But although the National Audit Office has recommended that lessons are learnt from the Lloyds share sell-downs, the performance of the two stocks over the past few months means that wildly different approaches are needed.
The European Commission’s report on a eurozone debt redemption fund and eurobills throws up as many difficulties as it does potential benefits. But as politicians have relied on the inventiveness of the European Central Bank, rather than their own efforts, to calm the storm of the eurozone sovereign debt crisis, it is about time they took the steps needed to permanently cure the currency bloc’s ills.
With a record breaking 28 banks working on its $6bn IPO, WH Group is being seen as just another Chinese issuer equating size with success. While the number of lenders on the transaction has been met with cynicism, the pork processor is actually being very strategic in its approach.
The European Banking Authority’s effort to improve transparency on balance sheet encumbrance has come to nothing. The draft guideline, which will be finalised by June, is practically useless because it doesn’t include emergency central bank liquidity, which is the largest and most important source of encumbrance. But that’s probably just as well, for if this disclosure became public knowledge, it would create just the sort of negative feedback loop that brought down the UK’s Northern Rock.
The risk weights for securitization have been halved, again, in the latest version of Solvency II. Naturally the market is pleased to be further out of the regulatory dog house, but the way risk weights (and therefore careers, businesses and economies) can be slashed at the stroke of a pen ought to give pause for thought.
Indian credits have made a solid return to the bond market after month long absence. IDBI Bank broke the silence last Wednesday with a well subscribed deal, while Export-Import Bank of India's issue, which priced on Monday, was also met with a strong book. A good window seems to have opened for Indian credits, but with a general election looming, they need to move fast if they want to take advantage.
The strong start to leveraged buyout financings in Asia this year, driven by China, is raising hopes among bankers that the momentum is set to continue, with market conditions considered ideal for companies going private or making acquisitions. But with the Asian LBO market still in its early stages, dealers wanting to bring home the bacon need to follow three steps.
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All International Bonds Ranking
|Rank||Lead Manager||Amount $m||No of issues||Share %|
|3||Bank of America Merrill Lynch||101,573.05||316||7.30%|
Bookrunners of All Syndicated Loans EMEA
|Rank||Lead Manager||Amount $m||No of issues||Share %|
|1||Credit Agricole CIB||9,929.31||26||7.07%|