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Turbulent market conditions of the Middle East war have pushed bond issuers and investors to try new things
A swift response is tempting, but lenders should avoid kneejerk reaction
Talk of de-dollarisation has evaporated. The dollar market remains the undisputed king of financing
Inflation caused by war threatens budding recovery in commercial real estate
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The Bank of England’s Funding for Lending Scheme (FLS) has finally caught fire. War in the Near East and the Oscars have obscured this extraordinary fact, but the last quarter saw almost as much borrowing as the entire year previously. This suggests that the banks were right all along — they weren’t lending because nobody was borrowing.
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There appears to be no stopping the rise in three month TaiFX, the interbank US dollar funding rate in Taiwan. The widening divergence between TaiFX and Libor has increased the pressure on Taiwanese banks, forcing many to shrink their offshore lending. It is time for bookrunners consider the alternatives. -
Deviation from the norm always draws out the naysayers. So when Gemdale (Asia) Investment issued a tap just two days after it priced a Rmb750m ($122m) three year bond, critics wasted no time in decrying the tactic. But as the issuer was looking to get the funding it needed without upsetting secondary markets, such flexibility should be applauded.
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The focus on Ukraine has moved from the macroeconomic to military sphere. But it is worth remembering that even if full scale conflict with Russia is averted, Ukraine’s economy is in an appalling state, and the bond market helped it end up there.
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Russian Railways’ lead managers last week claimed waiting a month for a favourable fall in rates before executing resulted in the lowest yield the company could have achieved on its €500m nine year bond. But that contradicts what bankers have often recommended as prudent bond market behaviour. Others should be cautious of following its example.
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When General Electric issued a debut $500m sukuk five years ago it did not receive a great deal of acclaim. But with the company considering another potential Islamic deal later this year, neither it — nor other rumoured western first time borrowers such as Total — should fear for a bad result this time round.
