Does sophistication bring benefits?
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People and MarketsCommentLeader

Does sophistication bring benefits?

It is not unusual to hear DCM bankers on sterling deals talk about the sophisticated nature of the investor base. Issuers on roadshows also often say they feel they have the best dialogues with UK-based investors, who have often done their credit work before meetings and want to discuss details in more depth than the usual page turning of an investor presentation deck.

However, it is difficult to see how the sterling investor base has managed to turn this positive perception of them into a tangible benefit.

Until Bank of England governor Mark Carney announced the institution would buy corporate bonds as part of its quantitative easing programme in August 2016, the sterling market had been languishing in the shadows and had almost become a niche market. It competed with the likes of the Swiss franc and Australian dollar markets for non-domestic issuers’ attention.

For several years sterling pricing was too wide for issuers to consider issuing in the currency instead of dollars, or euros, or one of those other niche markets, unless they had a natural need for pounds.

But this week, one of those offshore issuers, Total, trusted the sophisticated nature of the sterling market to understand why it was taking a leap of faith with a new approach to marketing. It marketed its bond at the reoffer spread — no initial ranges, no refinement, just the number.

The positive response from those sterling investors, particularly when compared to euro investors' response when Vodafone tried to do similar in the summer, may finally see that mature approach pay dividends.

A mature response from a sophisticated investor base deserves treating to more of the same.

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