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Sunday, 17 December 2017

Upfront

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  • Ding dong merrily on high

    Christmas has come early for investment banks this year. Last week, the annual haul of fees that banks earn from underwriting and advisory work crossed the US$100bn threshold for only the second time in the industry’s history – the only other time was 2007.

  • Made to be broken

    Last week the three main US bank regulators, including the Federal Reserve, told Congress they would consider revising the post-crisis guidelines on leveraged lending. It was a victory for Republicans trying to roll back financial regulation – or at least it looked like one.

  • Answers required

    It’s a frightening prospect that, a month before one of the biggest regulatory changes in European financial markets history comes into force, bond bankers are still in the dark about how their businesses will be affected.

  • On yer bike

    “HSBC likes nice people,” said one banker when asked last week why co-head of global banking Matthew Westerman is suddenly leaving the bank.

  • Talking junk

    For all the panicky headlines last week about the end of the world in junk bonds, the sector isn’t really in bad shape at all.

  • Toughing it out

    Is it time to batten down the hatches in EM?

  • Get on with it

    What is Venezuela’s President Maduro up to? On the face of it, his decision to make nearly US$2bn in principal payments on sovereign and state-owned oil company bonds – and then declare that he is looking to restructure the country’s debt – makes no sense.

  • Mind-blowing yoghurt

    Just when you think pricing on bond deals couldn’t get more irrational, along comes a trade that appears to defy all logic.

  • This way to the hen-coop, Mr Fox

    What’s the best way to avoid being accused of cheating? Invent the rules of the game yourself, of course.

  • Gulf of difference

    No Qatari borrowers have accessed the public bond markets since Saudi Arabia and three allies accused the country in June of backing terrorism – a charge Doha denies – and imposed trade restrictions as a result.

  • Not the next big payday

    Regulation brings innovation. And ever since regulators started pushing banks to raise additional capital, we’ve seen all sorts of product innovation in the markets – senior non-preferred debt, callable holdco securities, CoCos and Additional Tier 1 bonds.

  • Papering over the cracks

    For any penitent defaulter looking for redemption in the international bond markets, APP-China has a lesson about the price of forgiveness: it’s 9%.

  • Journey to the West

    In a rational market, increasing the supply of a product tends to lower the price. But for China’s offshore US dollar sovereign bonds, this has somehow had the opposite effect.

  • Suk it up

    Forget Mayweather versus McGregor. This week sees the start of a proper contest: a troubled Middle East corporate up against its bondholders. At stake is the future of the international sukuk market.

  • Decisions, decisions

    Credit default swaps have been through numerous iterations as part of market-wide attempts to restore confidence in an instrument that has a nasty habit of not performing as expected.

  • New connections

    Expanding stock trading links between Hong Kong and China to cover IPOs is an exciting next step for both markets. It’s also likely to disappoint investors on both sides.

  • Getting on the pot

    The transformation of Japan’s capital markets is gathering pace. The latest upheaval comes in the slow-changing world of yen bonds, where desperate investors are embracing global standards in search of higher returns.

  • More by luck...

    The market - and certainly the bankers who weren’t involved - were pretty dismissive of last week’s British American Tobacco dollars, euros and sterling bond deal that raised the equivalent of US$20bn - yes, twenty billion US dollars.

  • Frontier justice

    What a comeback for Iraq. Less than two years after the sovereign failed to print a deal amid rocketing yields, the war-torn country was able to sell a US$1bn deal that came well inside fair value.

  • Greece tightening

    The champagne corks have been popping in Athens after Greece’s apparently triumphant return to the bond markets. A €3bn trade at a five-year maturity and with a yield of 4.625% - that should be cause for celebration.

  • ​Don’t be daft

    A new rule introduced without any fanfare by the European Union at the beginning of the month has the potential to significantly damage the European structured finance market.

  • Special delivery

    New credit default swap definitions, intended to reflect the latest bail-in rules for bank debt-holders, could have been written with June’s resolution of Banco Popular in mind.

  • Getting carried away

    Markets reacted rashly to news that Banca Carige had apparently secured the backing of two major banks for a €500m rights issue.

  • Patience, please

    The collapse of Banca Popolare di Vicenza and Veneto Banca last weekend has triggered a fair amount of navel-gazing, and damaged the reputation of the European financial establishment.

  • Volatility index

    Two years ago, MSCI’s decision not to include Chinese A-shares in its benchmark emerging market index signalled the end of a bull run for mainland equities. In a bizarre twist, this year’s review in favour of Chinese stocks has again ushered in a new bout of volatility.

  • Sleight of hand

    What is a sukuk? After Dana Gas claimed last week that its outstanding Islamic bonds are no longer lawful, this is not merely a philosophical question but a highly charged issue that could destroy the sukuk market.

  • To encourage the others

    For once there was no can-kicking, just quick and decisive action.

  • Reality check

    The vampire squid is back in hot water. Goldman Sachs has an uncanny knack - maybe a penchant? - for finding itself at the centre of deals that attract attention for all the wrong reasons.

  • Saving Children

    IFR’s awards events in January raised over £1m for Save the Children, and the money is already helping the charity meet vital needs.

  • Spot the difference

    In a banking crisis, investment success is only partly about timing. It’s also (mostly?) about structure. That truth is underlined once more by losses in excess of US$4bn racked up by Singapore sovereign fund GIC’s investment in UBS almost a decade ago.

  • Swap-timism

    The derivatives industry descended on Lisbon last week for its annual dose of collective nitpicking over regulations designed to rein in the excesses of the pre-crisis era. This year’s ISDA AGM marked something of a watershed, however, as regulators and bankers appeared to be talking from the same book, if not always the same page.

  • EMIR fear

    Europe’s securitisation market looks to be the big loser from the European Commission’s proposed new rules designed to fix flaws in a previous round of sweeping derivatives reforms.

  • Rough Guide to Bonds

    Just as tourists are sometimes hostages to fortune when they need to buy their holiday cash, so Travelex discovered what it’s like to face an unexpectedly eye-watering rate when it had to pay an 8% coupon on its latest bond deal.

  • Loan time coming

    Rules are made to be broken, but some US Republicans want to throw them out entirely - at least when it comes to leveraged lending.

  • Saudi Arabian flag

    Lines in the sand

    Saudi Arabia can’t stop setting milestones. On Wednesday, the sovereign followed up last year’s US$17.5bn record-breaking transaction with the biggest ever sukuk offering.

  • Vicenza

    ​Good-bye or good buy?

    If not them, then who? That’s the question that investors in bank bonds will be asking if, as now seems increasingly likely, Italy is allowed to bail out Banca Popolare di Vicenza and Veneto Banca via what is being billed as a “precautionary recapitalistion”.

  • Brave new world

    If there’s one thing journalists should know about it’s digital disruption.

  • Beetle juice

    Business as usual is not a mantra that Volkswagen has been able to trot out over the past 18 months.

  • By the book

    The most remarkable thing about Kuwait’s deal last week was how unremarkable it all was.

  • A Cryan shame

    It’s been an eventful two years for John Cryan as chief executive of Deutsche Bank. From a market panic about the bank’s health last September to scandals about laundering Russian money, and from a very public stand-off with the US Department of Justice to numerous strategy overhauls, he’s certainly been a busy fellow.

  • The favoured few

    Investors were so afraid of missing out on the next Facebook that they allowed Snap (and its banks) to push sensible boundaries in its US$3.4bn IPO.

  • Three ways

    The European Financial Stability Facility raised a few eyebrows last week when it found it tough to sell long-end bonds – again.

  • Taking liberties

    It’s one of the most fundamental rules of the bond market: if you want to make significant changes to documents, you have to get permission from the bondholders and pay them a fee.

  • Non-performing solutions

    There have been countless attempts to draw a line in the sand: writedowns, recapitalisations and clean-ups. But Europe’s bad loan problem is one the Continent just doesn’t seem to be able to shake off. More than €1trn of loans – over 5% of what’s been lent out – have gone sour.

  • UniCredit

    This time it’s different

    UniCredit’s logo is a rather fetching number “1”. And at least on one measure, the Italian bank still lives up to that ambition: no other bank on the planet has a bad loan problem as bad. With an NPL portfolio of €77.8bn, one in every six euros the bank has out on loan is currently classified as impaired.

  • Homeland securities

    Bond investors around the globe who have become used to supply from large US corporates but in their own domestic currencies might soon have to find other outlets for their cash.

  • Barefoot devotees crawl and walk over the people as they jostle to touch the image of the black statue of Jesus Christ during the annual Black Nazarene Catholic religious feast in Manila, Philippines

    Shipping it in

    After a slow start to the year, the sovereign sector hit its stride last week.

  • Words’ worth

    You surely don’t need to be a literary critic to flourish in the high-grade bond market, but sometimes a close reading of the text really does help.

  • Power to the periphery

    You would have got long odds on the first Additional Tier 1 deal of 2017 coming from an Italian bank.

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