The rise of hedge funds as dedicated investors in the supranational and agency bond market was one of the biggest changes in that sector at the start of the year. But now they are pulling back from new issue syndications. We examine why market volatility resulting from the Iran war has sounded the retreat and also assess the impact their withdrawal is having on issuers' pricing power.
Meanwhile, the war in Iran is one of a number of factors affecting leveraged loan pricing. It has given CLO managers a chance to make more money, if they can get their hands on enough cheap loans to ramp-up the collateral backing their deals fast enough. But, as we discover, that brings them a whole new set of risks, especially in financial markets which react, as one source put it this week "tweet by tweet".
Finally, we ask why investment grade companies are having such success in the hybrid bond market. Counterintuitively, issuers are achieving debut deals and tight pricing on their riskiest form of debt just at a time when the war is making other markets far less certain. We discuss the dynamics at play.
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