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“Next year will be better than the last” has been the securitization mantra since the 2008 financial crisis. While the refrain may have grown weary as few signs of a market revival have emerged in Europe, they have reason to hold out hope for 2014 when regulatory reprieve could begin in earnest.
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The RMBS market in the Netherlands has long been a cornerstone of the wider European RMBS market, but it faces some stiff headwinds. House prices have fallen 20% from their peak, putting a growing number of mortgage borrowers into negative equity. The government’s efforts at reforming the housing market and reducing the Netherlands’ high LTV/mortgage tax deductibility model have only added to the sense of uncertainty, making turnover of new sales and origination of new mortgages sluggish. Despite all of this, RMBS performance remains very robust with short term and long term arrears barely rising over the past year. A bigger problem could be the lack of primary supply this year. Issuers from the Netherlands are very well funded and, as a result, have publicly issued only €4bn of new RMBS this year to date. When the absence of UK issuance this year is also factored in, there is a danger some investors might rethink their commitment to the RMBS asset class as a whole. In this roundtable, EuroWeek asked a selection of leading investors and issuers in RMBS from the Netherlands for their take on the macroeconomic picture, the shrinking volume of paper and the problems this might create for liquidity and investor appeal, and where potential spread volatility could arise in this sector.
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The Greek government announced in 2010 plans to raise €50bn from privatisations by 2016. This ambitious goal was lowered to €19bn, before being cut to €15bn.
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EM debt bankers patting themselves on the back for waiting until after the Federal Open Market Committee meeting to print deals owe more to luck than judgement. They should be encouraging issuers to take advantage of windows of market stability, rather than selling them the idea that they can predict the unpredictable.
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The Fed has done its bit to help EM bond markets. In May it smashed the euphoria of investing in EM like a rotten piñata. Last week it glued it back together keeping only the best bits — sustainable yield levels and investors with a long term interest in the asset class. It is now up to banks to ensure the recovering primary market party piece holds together enough to release a steadier stream of better quality treats over the next few months.
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Emerging market loan volumes staged a record comeback in the first quarter of 2013. But in their drive to jump-start the market, banks have let borrowers get away with too much.
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Five years ago this week, Lehman Brothers fell. The hubris of an investment banking industry that saw itself as master of the universe met a tragic reckoning.
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Credit Suisse is no longer giving out book sizes on its emerging market bond deals, either before or after they are priced. It is a compliance move that might be applauded in a non-competitive world. In banking, however, it means the firm is risking other desks poaching its investors and clients.
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From “morning refreshments and networking break” through “afternoon refreshments and networking break” to, finally, “chairperson’s closing remarks followed by drinks reception”, a lot can happen at a conference.