Public supply is slowly returning to the bond market as issuers come to terms with the volatility that is wreaking havoc on the market.
Although conditions may appear calm, uncertainty is still high. The iTraxx Europe main index of credit default swaps remains elevated, closing at 95bp on Monday — having spent the last two weeks hovering around a year high.
Meanwhile, swap rates have gyrated violently in recent weeks with intraday moves in the double digits. And while these moves have somewhat steadied, the uncertainty that underpinned them remains, albeit in the shadows.
This volatility and uncertainty that permeates the market is a perfect opportunity for primary market fintech firms to blood themselves and firmly engrain themselves into the bond market infrastructure.
What these firms can offer issuers and dealers is simplicity. And when the primary market is this choppy, simplicity and a straightforward execution is paramount.
Existing market infrastructure is a "Heath Robinson machine," one fintech CEO told GlobalCapital shortly after SVB collapsed. "Simple requirements are managed through very complex processes which result from bolting together legacy systems."
Through tasks as disparate as collating essential pricing data or automating settlement and term sheet creation, fintech firms present market participants with the opportunity to streamline the new issue process, remove potential pain points and maximising execution certainty.
For any issuers hoping to brave a volatile market, picking the right window and price is key. Firm, accurate and clearly presented market intelligence is needed to ensure that the best possible window is taken.
Fintechs, like InterPrice which launched an integrated API this week, have carved out a niche for themselves as purveyors of consistent and instant pricing information.
And when windows are slim, issuers need to access to accurate and up to date market intelligence to ensure they secure the best possible price for their paper.
For instance, commercial paper issuers have used the data provided by InterPrice’s platform to navigate the recent bouts of market volatility and lock in attractive funding cost.
But accurate information is only one piece of the pricing puzzle. All the market intelligence in the world cannot compensate for a sudden intraday deterioration in conditions.
When attempting to price a deal against an uncertain backdrop, speed and efficiency is key to maximising execution certainty.
Primary market platforms offer issuers the chance to slim down their settlement windows to almost an instant thanks to technologies like blockchain issuance and term sheet automation. And as UBS’s recent senior buyback shows, a lot can change in T+6.
This crisis might have started in Silicon Valley — but fintech firms, and their cousins at Silicon Roundabout, have an opportunity to make the most of an uncertain and volatile environment. Fintechs have previously shown that they can simplify the new issue execution process. Now is the time to show just how much value this can add.