Caricatures of the Swiss investor must change
The perception of the Swiss investor as exhaustively prudent is becoming ever more inaccurate. With borrowers of all stripes making inroads into the Swiss franc bond market, and buyers receptive to credits from across the world, the natives are more intrepid than other markets give them credit for.
A few years back, no one would have believed you if you said a residential property firm from Germany and a commercial bank from Qatar were the last two borrowers to sell bonds in Swiss francs.
The instinct would be to snap back that both credits were unsuitable for Swiss investors, who tread too carefully for the sector in one case and the region in the other.
And yet, that is what happened by Tuesday.
Swiss investors bought Sfr250m ($266m) of seven year notes from Grand City Properties last Thursday, while on Tuesday roughly 50 buyers rushed into a debut Sfr335m inaugural Commercial Bank of Qatar bond.
But Swiss investors, largely in search of yield and short-dated tenors, turning to exotic credits is quite a common occurrence. The affair began in earnest with a single-B rated Argentine state oil company at the tail end of 2016.
YPF's Sfr300m three year bond was the first high yielding issue in the Swiss franc market for a Latin American issuer, and the lowest rated foreign bond ever issued in the currency. Some Swiss bankers watched on with amazement that investors were prepared to go that far down and dirty.
But, that reaction is less and less common now, as there have been enough daring instances to see a pattern — that Swiss investors will often opt for spread pick-up over all else.
“Investors don’t necessarily love the idea of emerging market credit,” said one Swiss franc syndicate banker. “But they love the idea of good credits offering any spread with short dated bonds.”
There is now quite the smorgasbord of credits, Korean SSAs, Latin American corporates and Middle Eastern financial institutions all building curves in the Swiss market, and counterintuitively, the market holds less opportunity for SSAs from Europe or the US than other international borrowers.
This is more than the fusty caricature would imply.