Now that the Bank for International Settlements has made its feelings clear about the global use of prolonged monetary easing by central banks (‘Save yourselves! Stop now!’), a particular incident at last week’s Euromoney Global Borrowers and Investors Forum 2014 in London seems particularly apt.
When panellists at Tuesday’s panel on sovereign borrowing in the eurozone were asked whether the exuberant rally in periphery debt was due to each jurisdiction’s regiment of regional reform or simply the European Central Bank’s monetary easing policy, panellists mostly answered ‘regional reforms’.
But when the question was opened up to the audience, the response was different. Blog couldn’t see a hand raised to credit regional reform for the periphery rally. Virtually everyone in the room with a hand free catapulted their palms in the air when asked if the rally was ECB fuelled. Clearly, crediting regulation sounds good, but liquidity still rules.
High yield cheerleaders sense top of the market is near
There were no bankers on the panel so the sell side was represented by Roberto Vitto, head of corporate finance at Wind.
The Italian mobile phone company had just the day before completed a €4bn new issue to refinance old bonds at much lower coupons – the second exercise of this type and scale it had done in just two months.
The two exercises between them cut about €275m from Wind’s annual interest bill – and from the annual income of high yield investors.
It was a fitting symbol of the high yield market’s exceptionally bullish state. But Roberto was outnumbered by the buy side.
The other panellists were David Newman of Rogge Global Partners and Alan Miller of SCM Private – two investors with few illusions about high yield being a road paved with gold.
Alan, in response to the moderator’s first question, declared that he had actually just reduced his high yield allocation to zero, and confirmed that he was in fact “an ex-high yield investor”.
Returns had just become too low to make the game worth the candle, he judged, and his attention had switched to emerging markets.
It was a significant warning of the approach of the top of the market, that point every high yield investor has his or eyes peeled to search for. Or should have.
David is certainly on the lookout. He has his own metrics for identifying the point when it’s time to head for the exit – watch the ratio of “aggressive” financings to refinancings – but is definitely in cooling down mode now and looking to a point when it will be right to be out of high yield altogether.
You have been warned.
Security budget set to skyrocket at IFC
Blog had the privilege last Thursday of being invited to the London Stock Exchange for the listing ceremony of the International Finance Corp’s debut renminbi green bond — enjoying a morning that boasted speeches, anti-socially early champagne and journalists left shellshocked at being dragged out of bed at a banker-like hour of the morning.
However, the painfully early event was so exclusive that not even bankers that had been instrumental in the deal were guaranteed to get past the exchange’s eagle eyed security.
A late cancellation from a colleague left one banker with the opportunity to attend — only to be shunned by the security conscious stock exchange, which insisted that it would need more warning for any changes to the guest list.
Blog has been unable to confirm that security had been tightened in order to prevent IFC funding chief Ben Powell’s legion of female fans from crashing the party to snatch a glimpse of the bond market’s answer to Richard Burton — though anyone barred from entry to the event can always take a look at the LSE’s website to get their fix.