UK

There was a dark mood in equity markets on Wednesday morning after the UK parliament rejected prime minister Theresa May’s negotiated Brexit withdrawal agreement by a huge majority for a second time. A possible delay to the UK's departure from the EU and all of the crippling uncertainty that entails is set to continue to hamstring equity capital markets.

Corporate debt markets are behaving as if Brexit didn’t exist. Issuers are swimming in demand that astonishes seasoned observers — and market participants, though they may be scratching their heads in puzzlement at the UK’s erratic career, are unanimous that business can go full steam ahead.

A vote to leave the EU has left the population of the UK divided. The country’s banking sector will increasingly come to share in this division, with the largest financial institutions able to muddle on in capital markets even as smaller lenders find themselves beholden to events in domestic politics.

UK medical equipment manufacturer Smith & Nephew has agreed to buy US firm Osiris Therapeutics using cash and debt, as consolidation in the healthcare sector continues to provide one of the few bright spots for M&A activity this year.

UK covered bonds have begun to perform in the secondary market, with investors spying opportunities to pick-up good relative value and sound fundamental protection. But UK issuers have been notable for their absence in euros this year due to continuing uncertainty around the outcome of Brexit.

DWF has become the first UK law firm to list on the main market London Stock Exchange, after the company priced its £95m IPO at 122p a share on Monday.

A pair of UK companies have refinanced their revolving credit facilities, as loans bankers insist there is plenty of activity going on behind the scenes.

Barclays is ready to head to Japan with a new bond offering if a series of crucial votes in the UK Parliament this week can help to clarify the next steps in the Brexit process.

Europe’s corporate bond market could be read two ways this week. On one hand, conditions were superb for issuers — many large deals were brought and spreads were usually rammed tighter by 20bp or even 30bp during bookbuild, to fine or negligible new issue premiums.

Whether Vodafone’s £3.44bn issue of two and three year mandatorily convertible bonds on Tuesday this week ends up being judged a corporate finance success for the company may take time to discover. But it is already clear it was a great hit with investors — much more so than the first time Vodafone issued the structure in 2016.

Vodafone’s £3.4bn mandatorily convertible bond with share buyback language, sold to huge demand this week, may have created a new financial product. Certainly it will set off a maelstrom of analysis and pitching to clients, as banks seek other companies willing to try this daring structure. Jon Hay and Aidan Gregory report.

The root of arbitrage is the same thing being priced differently in two markets. As markets have got bigger and more sophisticated, arbitrage has become harder to find.