Coronavirus

Italy’s capital markets bankers are keeping calm amid the coronavirus crisis, getting used to working from home, and trying to support clients as well as they can, while wishing for help from Europe and the European Central Bank. But they are not allowing themselves to hope the worst is over. The health crisis is acute and getting worse.

Italy’s equity capital markets bankers have not thrown in the towel on 2020, despite much of the country effectively being shut down by the spread of the Covid-19 coronavirus.

With EM bond funds already seeing outflows, many fund managers are frantically trying to raise cash in preparation for what the next week may hold with investors gripped by the “disastrous” performance numbers generated over the last few days.

Banks have started splitting up trading teams across locations, while many of those working in the capital markets have been stuck at home. This has caused a couple of hiccups and worries but some wonder if it will lead to a shift in attitudes about meetings and work flexibility once coronavirus passes.

Europe’s equity capital markets bankers are postponing new stock market listings until after Easter at least, given the severe logistical challenges posed by efforts to contain the Covid-19 coronavirus and heightened equity market volatility.

Can the capital markets function properly with its workforce operating remotely, whether from home or at disaster recovery centres? This question is becoming increasingly important as the Covid-19 infection rate rockets and the death toll grows. One organisation that has more experience of coping than most is the Asian Infrastructure Investment Bank, based in Beijing.

On what some EM investors described as the worst day for markets since 2008, Latin American bond buyers were left staring at a sea of red as the region’s fixed income markets were stunned into dysfunction by the sharpest fall in oil prices since 1991.

Another brutal start to US trading has killed off any hope of SSA deals coming to market today or tomorrow, but participants across the public sector bond markets are hopeful that the week will not be a complete write-off.

The yields on 10 year Italian and Greek government bonds rose by 30bp-40bp on Monday from Friday’s close after Italy placed a quarter of its population under quarantine over the weekend as the Covid-19 virus escalates.

Covered bond spreads jumped wider on Monday in response to even sharper moves in the credit market. The selling was modest in volume and, with market makers protecting their bids, trades were done far wider than indicative levels.

Investment grade European companies watched their credit spreads swing out by around 30bp on Monday as global asset prices plunged. Bankers warned that borrowers rated BBB- that have not prepared their capital structures for such a rapid decline in market conditions are going to have a tough time funding themselves.

Emerging market bond valuations were in free-fall on Monday, after a collapse in the price of oil gave investors yet another reason to worry about the global economic outlook.