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Opportunity knocks for public sector covered bonds
Caffil’s debut Covid-19 bond issued this week has shown that the moribund public sector covered bond market can play a crucial role in financing the response to the coronavirus crisis. The deal implies that the hitherto dormant public sector programmes many issuers have set up across Europe have scope to be reactivated to provide stable long-term financing for debt-ridden regional borrowers.
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Pandemic? What crisis?
The coronavirus has made fantastical numbers commonplace in the corporate bond market. Everywhere one looks, results are being published that in any other time would herald the sudden collapse of companies. But you wouldn’t guess that from looking at the corporate bond market.
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Deutsche regains Germany crown in time of crisis
Deutsche Bank has regained its number one spot in its home market, but it was its traditional investment banking business that shone rather than investments made as part of the firm’s new Germany-focused strategy, writes David Rothnie.
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How not to home school in vocabulary
Do you remember what it was like to work in an office? Blissfully boring. Those working from home now have to juggle work and personal life — and try not to turn their children into market-savvy scoundrels.
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Bailouts are not just for the virtuous
Whole industries are on their knees, desperate for salvation from governments. Moral outrage fills the air, as fortune's wheel turns plutocrats into mendicants. States have the power of life and death — but they must resist the temptation to play God.
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Europe's central bank is missing the mark in money markets
The ECB has, despite an early gaffe, decided that it is its job to close spreads after all — and for the most part, it is excelling in its task. But its attention is focused on the bond market and, as a result, those who rely on the money markets for short term funding are suffering.
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Tell me why you don’t like Fridays
When Ecopetrol, which has been talking about bringing a bond for an absolute age, chose to do so last Friday after an oil price crash and in the middle of the coronavirus pandemic, it took the market aback. Fridays after all, are not typically when any self-respecting Latin American bond issuer comes to the market. But there is nothing typical about Lat Am primary markets these days.
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The ECB is now Europe’s foremost rating agency
From Italian government bonds to fallen angels, nothing is junk unless the European Central Bank says so.
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Forget about a summer slowdown
Capital markets bankers wondering about a possible ‘summer slowdown’ in transactions should put the thought firmly out of their heads. This year, the traditional break in August is likely to be replaced by an all-hands-on-deck approach to tackle the deal backlog.
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Private sector needs to up the ante on Covid-19 relief
Kookmin Bank’s move to print a dollar bond to raise money for Covid-19 relief shows that sovereigns, government-owned banks, agencies and multilateral development banks are not the only ones that can help tackle the pandemic. Privately-owned firms also have a big role to play in global stimulus efforts.
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Keeping Tabs — a new column from GlobalCapital
Welcome to the first edition of Keeping Tabs. There is a huge amount of information to take in at the best of times in the capital markets. During a crisis, it can be overwhelming. So, each week, we will bring you the very best of what we in the GlobalCapital newsroom have found most useful, interesting, informative and entertaining from around the web.
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In this pandemic, all bets are on
“Who remembers places?” ran a joke on social media as lockdowns swept the globe. The idea that something so fundamental could be forgotten so quickly applies to capital markets too. There, the joke might ask who remembers credit risk. But at a time when central banks seem keen to underwrite credit of almost every variety, maybe it doesn’t matter.
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Transparency is the best capital markets policy
Firms can spend vast amounts of time window-dressing their balance sheets to look the best they possibly can within the limits of reporting regulations. Within those limits, everything goes.
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Broking’s challengers look to grasp crisis opportunities
Europe’s banks sniff opportunities amid the crisis as they look to build out their corporate broking businesses, but they will face fights to remove incumbents, writes David Rothnie.
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When site visits mean six months in solitary
How can banks conduct due diligence at a time when so few are willing or able to travel? Staff at one Chinese broker have been presented with a rather unappealing solution.
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China bond investors deserve better treatment
Do investors matter in China’s bond market? Not much, judging by a recent series of bondholder meetings. HNA Group Co and Gemdale are the latest companies to push their luck. It is time for regulators to push back.
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Flash crash in oil is just a foretaste
Oil trading at minus $40 a barrel may be a one-off, but ultra-cheap oil is not. The industry’s bonds may look attractive at the current inflated yields — but they should tempt only investors who are brave, patient and selective.
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Europe's banks must relearn market funding is normal
Canadian banks should be applauded for funding themselves in public with deals bought by real investors in a range of currencies at actual market clearing levels — astonishing though that may be for the many entitled European issuers that have shamelessly become accustomed to central bank funding.
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MREL bonds: the time is now
Financial institutions with funding needs that are holding off in anticipation of better issuance conditions are doing it wrong. Waiting until the other side of earnings season to bring deals will likely prove a mistake.
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UK leads the way when it comes to corona recaps but can still do better
With its more relaxed rules around pre-emption rights, the UK has led from the front by allowing embattled companies to raise equity to keep themselves alive during the coronavirus pandemic. The market's flexibility means there have been no damaging delays waiting for for formal rule changes. Such pragmatism is admirable, although more must be done to protect retail investors from dilution.
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Bad banks need to be a domestic affair
A eurozone bad bank would have been difficult to institute even without the coronavirus crisis to spur it on. Now, with countries diverging on moratorium measures in response to the pandemic, it’s verging on impossible.
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Asia’s dollar bond issuance offers lessons
Recent dollar bonds in Asia offer timely insight into the ingredients needed to seal deals in the Covid-19 environment.
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No return to normal for Asia’s loan market yet
Pressure on Asia’s loan market has eased recently as funding costs come under control and the Covid-19 spread in China slows down. But bankers hoping for a quick rebound in deal flow should keep their expectations in check.
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Starting wide is starting right
The tussle between bond syndicate desks and investors about whether opening books well wide of the final target spread is a worthwhile endeavour or a red flag for unprofessionalism has raged for years. This time, syndicate desks have called it right to start deals so cheap.
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TALF just lip service for CLOs
The CLO market is still struggling to find equilibrium as the coronavirus pandemic spreads. The Federal Reserve’s expansion of its Term Asset-Backed Securities Lending Facility (TALF) to include CLO paper as eligible collateral was cheered upon announcement last week. But some puzzling limitations to the Fed’s terms will do little to help the market reboot.
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Financial sponsor teams must play waiting game
Banks have been building their financial sponsor coverage teams on a record period of deal making. Now they have a different fight on their hands, but bankers are playing down the threat of a 2008-style meltdown, writes David Rothnie.
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Dressing for success during isolation
We're living in unprecedented times given Covid-19 related lockdowns, but there's no reason for us to lose all semblance of normality.
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Chinese borrowers: it’s time to get real
Chinese banks’ eagerness to lend has long allowed the country’s borrowers to get away with razor-thin pricing on their offshore loans. Not anymore.
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Roadshows: virtual a reality for Asian IPOs
Asia’s third online-only IPO was launched this week, confirming that virtual roadshows are a new normal for the region’s equity capital markets amid the Covid-19 pandemic. Companies elsewhere should take heed.
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Clients must drive big chance for change in post-pandemic capital markets
There has been much discussion since the financial world went into lockdown about how life in the capital markets will change once governments lift restrictions. Chief among those concerns has been whether the usual business of putting deals together needs to burn the Bacchanalian quantities of jet fuel and waste the many hours lurking around airports that capital markets air miles enthusiasts were doing before Covid-19 grounded them. If that is to change, borrowers and investors need to make it happen.
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Beijing’s bargain hunters will be blocked at every turn
The re-emergence of economies from their Covid-19 cocoons will leave winners and losers in the medium term, with China likely to approach normality again well before the West. But acquisitive Chinese companies hoping to pick up bargains in Europe will face an insurmountable heap of regulation.
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China’s coronavirus response: capital markets take centre stage
China’s government has won plaudits for its response to the Covid-19 coronavirus. That praise should extend to its capital markets.
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Debt relief: normal rules should not apply
Sovereign defaults are part of the territory for emerging market investors but even by the standards of previous crises, surely nothing compares to the economic catastrophe that is rapidly engulfing large parts of the developing world.
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A credit paradox: ratings are ignored — and feared
For many years, corporate debt investors have scratched their heads and wondered: will anything, ever, cause the returns on bonds to go back to normal again?
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Luckin Coffee: out of luck
Luckin Coffee seemed too good to be true. It was.
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Absence of absence makes heart grow colder
The government’s response to the coronavirus has forced me to spend more time at home. Unfortunately, my wife is doing the same thing.
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Crisis sparks endgame fears for Europe’s investment banks
'We are all in this together' is not a view Europe’s investment banks will recognise when they compare themselves with their formidable US rivals, writes David Rothnie.
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Asia has earned leadership — now it must show it
The way Asian states including China have dealt with the coronavirus has put Europe and the US in the shade — now they should lead the international financial fightback.
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Private equity is just another ownership structure
Outrage has erupted among US progressives at efforts from the private equity industry to ensure their portfolio companies get a piece of government support for corporates. The buyout barons don’t do much to endear themselves to the public, but sponsor funds are just another legal vehicle for owning equity — and there’s no point punishing a company for its owners.
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Bank capital: pretence is better than nothing
Armies of wonks have spent the last 10 years dreaming up a panoply of bank capital tools, from additional tier one capital to MREL, to make sure “too big to fail” can never happen again. Next time, they claimed, private investors’ capital would be burnt in an orderly process, saving taxpayers from bailing out banks.
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The virus crisis is a proving ground for CLOs
CLOs are under acute stress as the coronavirus pandemic wreaks havoc on corporate credit, but the situation presents an opportunity for the market to prove itself to sceptics.
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Bathroom breaks are the bane of working from home
Investment bankers are now working from home en masse. That can lead to occasional moments of embarrassment.
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Volatile funding costs: a test for Asian loans
Rising dollar funding costs for Taiwanese banks have made them push an existing borrower back to the negotiating table so that they can demand better returns on a loan. More worrying than the triggering of the market disruption clause, however, is the volatility that forced the move.
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HSBC's Quinn’s plan just got tougher to execute
The bank has removed leadership uncertainty but the coronavirus means HSBC’s restructuring will be delayed.
