Review of the Year 2017 and Outlook 2018

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  • Editor's overview: Brave old world — life after QE

    As central banks beat their retreat from bond markets and press on with raising rates, normalisation is a word capital markets could well come to despise in 2018. By Toby Fildes.

  • Editor's overview: The end of Pax Americana — twilight of the West or Europe’s opportunity?

    As Donald Trump leads the US's retreat from the world, how will global capital markets react to this tilting of the landscape? Some see an opportunity for Europe and its banks. Others see a hastening of the inevitable rise to global influence of other powers — above all China, but also Russia and India — and perhaps even, in its own region, the newly assertive Saudi Arabia. By Toby Fildes.

  • Editor's overview: M&A — with EU growing, the recipe is complete

    Unlike recent years, when the M&A pie has turned out more lukewarm than piping hot, this year has one extra crucial ingredient: really convincing European growth. By Toby Fildes.

  • Editor's overview: China is coming — faster than you think

    The big beneficiary of the US’s international fatigue will be China. And China is more than ready to take advantage. By Toby Fildes.

  • Editor's overview: MiFID II — enforcing virtue, risking sterility

    MiFID II might qualify as one of the wonders of the modern world. At 1.5m paragraphs, including all its appendages, it swathes a blanket of mind-numbing verbiage around activities that were once fast and exciting.In that sense, it is the embodiment of modern financial markets and of modernity itself. By Jon Hay.

  • Editor's overview: Green finance — everyone is doing it

    Green finance, once a niche experiment, has become central to capital markets. This is just the beginning. The market still needs to find its true role, but private sector interest and public support are snowballing. By Jon Hay.

  • The GlobalCapital debt capital markets survey: banks expect to make money and hire

    Heads of debt capital markets at 20 of the top investment banks shared their thoughts on how they see 2018 with GlobalCapital in December. Almost all banks are optimistic about business prospects, especially for financial institutions and SRI issuance — though they expect spreads to widen. European politics has slipped down their list of worries, but asset bubbles have risen to the top. Research by Toby Fildes and Ralph Sinclair, graphics by Sam Medway and Jon Hay

  • Theme for 2018: Can there be QE tapering without the tantrums?

    The era of quantitative easing is ending. The benefits for the real economy will be hotly debated. But for the capital markets the key question will be how investors react to the withdrawal of official money printing and the inevitable rise in volatility, writes Ralph Sinclair.

  • Theme for 2018: Radical US tax reform could change the corporate landscape

    Economic conditions are ripe for the mergers and acquisitions that drive capital markets. Into this mix comes a potential US tax reform more radical than any for decades. This is bound to tilt boardroom decisions about strategy — if nothing else, US CEOs could suddenly have more cash back at HQ than they know what to do with. Jon Hay and Sam Kerr report.

  • Theme for 2018: Are European banks ready to go back on the offensive?

    2017 saw some serious capital raising by European banks. Four European globally systemic banks, in four monster rights issues, raised more than €30bn — partly to deal with non-performing loans and partly to reclaim their places in global investment banking and capital markets. Even banks that did not turn to the equity markets sought to conserve capital — but is 2018 the year when belts will start to be loosened again? Owen Sanderson reports.

  • Theme for 2018: Children of the resolution — lessons from Banco Popular

    Banco Popular’s failure is likely to go down as a successful first case for the Single Resolution Board, but the process has raised big questions about transparency, liquidity support and capital. Learning from these issues is going to be crucial for the future of European bank supervision. Tyler Davies reports.

  • Theme for 2018: Who will win from MiFID II in fixed income?

    MiFID II rips up the market rulebook — and replaces it with a whole bookshelf of new rulebooks. Entire divisions have worked flat out to get ready for the regulation’s official start on January 3, and it’s certain to overturn the established competitive order. Nell Mackenzie looks at the winners and losers.

  • Theme for 2018: Banks stumble through Brexit fog to new plans, in London or not

    Banks and other financial firms operate in complex lattices of regulation. But for any firm based in the UK and operating internationally, Brexit means they have no idea what regulations will apply, come March 2019. They cannot afford to do nothing, yet do not know what to plan for. As Nigel Owen reports, the response has been to plan for every scenario, including relocation from London.

  • Theme for 2018: Survival of the fittest as MiFID II burdens derivatives players

    Five years after being pushed on to trading venues in the US by the Dodd-Frank Act, over-the-counter derivatives players are beating a similar path in Europe, under the Markets in Financial Instruments Directive II. Most people think MiFID II has been a worse experience, and will make it harder for small players. But efficiency gains may follow. Ross Lancaster reports.

  • Theme for 2018: Debt and derivatives players set out on long road away from Libor

    It is six months since Andrew Bailey, head of the UK financial regulator, set the clock ticking on a transition from the London interbank offered rate to an alternative. But if credible replacements are to be ready by his 2021 deadline, there is still a mountain of work to do. Ross Lancaster explores the risks of phasing out the old benchmark and asks if it could yet survive.

  • Theme for 2018: Capital markets brace for blockchain breakthrough

    When the shadowy figure known as Satoshi Nakamoto launched bitcoin in 2009, few predicted that the technology underpinning it would, in a few short years, be hailed as an invention as important as the internet. Capital markets are on the front line for disruption, writes Lewis McLellan.

  • 2017 Bond Deals of the Year: Sovereigns, Supranational and Agencies

    After a year in which a myriad potential political risks failed to materialise and SSAs enjoyed extremely strong conditions, GlobalCapital used our editorial judgement, with inspiration from our world-famous Bond Comments and patented BondMarker app, to pick what we felt were the top trades of the year.

  • LBBW SSA Roundtable: Can SSA market get any better for issuers after a stellar 2017?

    After a superlative funding year for eurozone public sector borrowers, thanks partly to the European Central Bank’s asset purchase programme, some of the region’s top issuers and investors discussed with GlobalCapital the outlook for 2018 — when the ECB will start halving its monthly purchases to €30bn.

  • SSAs: Cheers as dollar curve opens and ECB keeps money tap on

    Supranational and agency borrowers enjoyed enviable conditions in the bond market last year, with European Central Bank quantitative easing creating long end funding opportunities and a deep dollar market providing some big deals in the short end. But central bank actions could mean the environment is even better in 2018, writes Craig McGlashan.

  • SSAs: Political risks linger, but the ECB trumps all — for now

    Thanks to quantitative easing, sovereign bond markets have been impervious to political volatility in recent years, getting through 2017’s shocks and surprises in serene style. But that could all be about to change as the European Central Bank starts to wind down its vast bond buying programme. Craig McGlashan reports.

  • Swiss Franc Bond Market: Swiss spot windows for foreign borrowers in francs

    The Swiss franc bond market’s twin maladies of low interest rates and unattractive basis swap levels, which have hobbled foreign issuance since 2015, are showing signs of regression. Arbitrage windows will open this year as the market’s health improves, and financial institutions are best placed to exploit them. By Silas Brown

  • SSAs: Niche bond markets to offer a yield haven despite core hikes

    Niche currency bond markets in 2018 will offer borrowers not just a chance to find arbitrage funding — and investors some respite from the brutally low yields in core markets — but possibly a slightly easier regulatory regime than that applied to core currencies, writes William Chambers.

  • RBC Capital Markets Roundtable: Canada’s borrowers in good shape to take on tricky 2018

    Canadian public sector issuers had a barnstorming year in the international debt markets in 2017, propelled by a strong economic performance by Canada and many of its provinces. But challenges loom — uncertainty over Canada’s trade relationship with the US, geopolitical instability and changing global monetary policy are just three of many concerns that borrowers, bankers and investors in Canada’s public sector bond markets will have to deal with this year. GlobalCapital met key market participants in Toronto in November to discuss the key issues.

  • 2017 Bond Deals of the Year: Financial Institutions

    In many ways, the financial institutions bond market ran away with itself in 2017. Spreads formed one-way traffic, grinding relentlessly tighter, even as some corners of the market convinced themselves a correction was imminent.

  • Financial Institutions: Banks in 2018 — optimising capital structures

    Banks are now close to meeting their regulatory targets for issuing the new kinds of capital.They will turn their attention in 2018 to optimising their capital structures, writes Tyler Davies.

  • Financial Institutions: AT1 to forge ahead after year of rally and resolution

    Technical factors suggest additional tier one (AT1) capital yields will continue to fall this year, even after a remarkably strong 2017. Ironically, the Banco Popular resolution, which burnt AT1 holders, actually made the asset class look more attractive in relative terms. Jasper Cox reports.

  • Financial Institutions: Walking without crutches — the last push for TLAC

    More than a decade after the financial crisis began, European banks are finally close to building new capital structures that should allow bail-ins to replace bail-outs. But with central banks promising to step away from financial markets in 2018, the last push could be the trickiest part of all. By Tyler Davies.

  • Financial Institutions: Covered bonds fight for space as non-preferred issuance rises

    Banks will prioritise funding that helps meet their regulatory ratios in 2018, but covered bonds will continue to play a pivotal role because they provide the cheapest cost of funding. By Bill Thornhill

  • Financial Institutions: Resolution talks heat up as insurers eye capital structures

    Having waited a while before testing the water, insurance companies are finally issuing all the debt capital securities described by the Solvency II regulations. But the future looks complicated, as growing calls for an insurance resolution framework threaten to overhaul the way firms are supervised in Europe. By Tyler Davies

  • Securitization: Green opportunities appear as PACE accelerates

    Europe lags behind the US in green securitizations, but efforts buoyed by pro-ABS regulations — and an initiative to kick-start the Property Assessed Clean Energy (PACE) market in Spain — could soon change that. Meanwhile in the US, ABS participants are hyping the emergence of a robust secondary market for residential PACE bonds, in addition to increasing momentum in commercial PACE ABS, after a maiden transaction hit last September. Sasha Padbidri and Sam Kerr report.

  • Securitization: Hot loan market to test CLO managers’ mettle in 2018

    The onset of risk retention rules proved an unexpected boon for the US CLO market last year. The resulting surge of investor demand meant placing new deals was no real challenge. But in an increasingly aggressive loan market, CLO managers are being forced to make bold credit decisions to generate expected returns, writes David Bell.

  • 2017 Bond Deals of the Year: Corporates

    In 2017 the continuation of the ECB’s Corporate Sector Purchase Programme helped dampen volatility in the corporate bond market, allowed spreads to continue a long grind tighter and persuaded a diverse range of issuers to access the market. Debut issuers took advantage of some of the best ever conditions for issuance, while others returned after many years.

  • The GlobalCapital Loan Awards 2017: the Nominations

    GlobalCapital is pleased to reveal the nominations for its Loan Awards 2017. We thank all the voters and congratulate all the nominees. The winners will be announced at the Loans Dinner in London on February 7.

  • Corporate Debt: How many investment banks does it take to sell a bond?

    Corporate bond issues in Europe with eight or nine bookrunners have become commonplace. The trend is symptomatic of title inflation — originally there was one bookrunner among two or three lead managers — and of the care with which companies share out their ‘wallet’ of ancillary business to relationship banks. For the banks it means having to do a lot more deals to earn the same money — and having to contend with an unwieldy syndicate. As Nigel Owen reports, at least the market is competitive, but when conditions get trickier, issuers may want more streamlined teams.

  • Corporate Debt: Flickers of hope across Europe as M&A stars align

    The perennial dream of the investment grade loan market is a large company looking for finance to back its jumbo acquisition. With lenders flush with cash, borrowers confident and growth returning to Europe, this year might turn that wish into reality, writes Silas Brown.

  • Corporate Debt: Private debt — a borrower’s market

    Private debt is in vogue. US private placements and Schuldscheine — with a little help from Euro PPs — racked up roughly $100bn-equivalent of new issuance for companies in 2017. They should beat that in 2018. But with demand outweighing supply, investors have to stretch to accommodate borrowers, writes Silas Brown.

  • Corporate Debt: High yield’s problem — where are the debutants?

    The high yield market is struggling to attract new issuers. Some believe the more flexible documentation on loans and alternative lending are luring debut leveraged debt issuers away. Could high yield lower its requirements to attract them back in 2018? Unlikely. But it can still find first time borrowers among companies unafraid of disclosure. Victor Jimenez reports.

  • Corporate Debt: Levfin optimistic for revival in leveraged buy-outs

    As Europe’s economy regains its long lost momentum, private equity firms are at last expected to start putting more of their unprecedented mountain of dry powder to use in 2018. Signs are already there of PE firms making bigger bangs with leveraged buy-outs, and if that continues, levfin investors will cheer the flow of new debt that results. Victor Jimenez reports.

  • 2017 Bond Deals of the Year: Emerging Markets

    For CEEMEA bonds, 2017 was a record breaking year and one which pushed the boundaries of product, tenor, and issuer. The $200bn of bonds raised in CEEMEA, and the $140bn raised in Latin America are the highest annual volumes on record. Investors’ seemingly insatiable appetite for EM debt fuelled massive inflows into the asset class and kept the many idiosyncratic risk events – from Qatar’s regional isolation to deteriorating relations between Turkey and the US– contained. Picking out the deals of the year for 2017 was not easy for GlobalCapital’s editorial team, but after much deliberation the below were chosen.

  • Emerging Markets: Investors face crunch year as rates tick up

    Emerging market bonds had a fantastic 2017, with issuance volumes the highest on record and returns the highest in global fixed income. But with rates ticking up and EM valuations looking stretched, 2018 will be a much trickier year for investors to navigate. Virginia Furness reports.

  • Emerging Markets: Bond markets look to new frontiers despite rate rise fears

    While US Fed rate rises and the ECB’s tapering of its QE programme could knock some of the froth off the top of exuberant EM debt markets next year, there will still be plenty of opportunities for debut and frontier issuers to raise cash in innovative ways. Virginia Furness reports.

  • Emerging Markets: Middle East debt markets roll with the punches

    As 2018 begins in Middle Eastern debt markets, there is much to do, and much to contend with. Investors in the region are used to unrest and tension but it has started to crop up in unexpected places. Francesca Young and Bianca Boorer report.

  • Emerging Markets: Private bank woes continue but strong outlook for Russian corps

    The fall-out from the failure of private lender Otkritie continues to weigh on Russia’s financial sector, but heavy bond redemptions and higher oil prices are expected to support corporate issuance in 2018. Virginia Furness and Bianca Boorer examine the outlook for Russia’s capital markets.

  • Emerging Markets: LatAm’s land of opportunities shows no sign of slowing

    Latin America faces elections in three of its largest economies this year, but bond market participants are feeling confident, after technicals helped 2017 to defy all expectations and with economic activity set to improve in 2018. Oliver West reports.

  • ECM Outlook Survey 2018

    The illustrations on these pages display the results of GlobalCapital's survey of the outlooks for market activity in 2018 of leading investment banks in ECM. Seventeen banks took part in the survey, including seven of the top eight firms. By Jon Hay, Sam Kerr, Aidan Gregory

  • ECM: MiFID II — shake-up of research carries risks for capital raising

    MiFID II is finally upon us. To many, it is simply a monster compliance burden. But in the world of equity trading and research, the effects could be profound. In 2018 for the first time, most asset managers will be paying for research out of their own money. If that means research provision is decimated, it could be bad news for small companies — and new research models may be needed. Jon Hay reports.

  • ECM: No assets? No problem, say Reit and Spac investors

    One of the fastest growing corners of the equity capital markets, particularly in the UK, has been the listing of investment funds and cash shells. The popularity of this asset class will continue in 2018, just as long as rates stay low and inflation continues to rise. Aidan Gregory reports.

  • Derivatives: Asset managers catch on to risk premia strategies

    With yields compressed and equity volatility at a historically low level, hunting for consistent returns has been a challenge for asset managers and institutional investors alike. But as Costas Mourselas reports, the meteoric rise of risk premia strategy, a type of passive investing, promises to at least partially alleviate those woes.

  • Derivatives: Deal-contingent hedgers set sights on infrastructure

    Deal-contingent products — flexible derivatives for hedging the FX risk of cross-border acquisitions — are moving from the private equity industry to other markets. Infrastructure is considered a prime fit for the tool. But tricky accounting standards and incoming regulation could complicate the instruments’ roll-out to new users, writes Ross Lancaster.

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