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Perhaps it was stimulus envy — years of taking a back seat in the popular mind to the central banks of the US, the European Union, Japan and the UK.
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The European FIG market got off on the right foot this week, with issuers learning from mistakes made toward the end of 2014 and offering larger premiums to cash-rich and yield-strapped investors that want to put their money to work before yield targets get even harder to hit responsibly.
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On December 30, when most investors were on holiday, Credit Suisse changed the terms of its existing covered bonds from a hard to a soft bullet maturity with the approval of just a few investors. Other issuers looking to change the terms of existing deals should be more upfront about liability management exercises that could put investors at a disadvantage.
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Mention “Basel capital charges” to someone in the securitization business and prepare for a shudder — the industry has had to swallow new rules every year for three years, and costs could still cripple the market. But help could be at hand from another set of Basel rules.
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The inconvenient truth about credit ratings is that they are one of the least bad options for measuring credit risk. Basel’s latest proposal to write the agencies out of regulation will simply introduce new problems.
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If you take a look at the volumes of bank capital sold in 2014 it’s hard not be impressed. Looking at volumes alone, you’d think the year had been an unqualified success. But bank treasurers should learn a few lessons ahead of January.
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Even if you have never sailed a boat through a storm, avoiding a potential one is the obvious choice. But investors in the European bond markets have been sailing into storms they knew were coming all year.
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Industrial and Commercial Bank of China (ICBC) took plenty of plaudits last week, with a unique triple currency additional tier one (AT1) transaction that included a record-breaking offshore renminbi tranche. While some say that the trade was a testament to the depth of the CNH market, that is an argument too far. This was anything but a conventional trade. -
This week the ECB scaled back buying in the primary covered bond market and gave the private sector a chance to set the price.
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FIG dealmaking will return in 2015, but it will be smaller and less exciting than it has been in the past, writes David Rothnie.
