In many ways, the sterling bond market works as a microcosm of its larger global cousins, reflecting the same themes that exercise the minds of participants throughout the rest of the world, albeit on a less cluttered stage.
To truly do the sector justice takes a house that can call upon deep international expertise, but also one that has not sacrificed its domestic roots in gaining that capability.
HSBC is just such an entity, combining undisputed world vision with local history.
The similarities between the universal and the domestic are plain to see: a bedrock of stalwart repeat issuers; the search for cross-border diversity; and the need for innovation to keep the market fresh.
HSBC was in the vanguard of all of these themes.
“What we did was position our DCM business to advise and enable clients,” said Jean-Marc Mercier, global co-head of debt capital markets.
“We have a good anticipation of what is possible, and at many times we have been a strong voice,” added global head of debt syndicate Adam Bothamley.
Similar to other markets, the sterling arena is underpinned by its frequent visitors. And in terms of volume, it is the public sector borrowers that are at the forefront of this subset.
Close to home, the UK DMO again awarded a mandate to HSBC, this time with a lead management role on its 2046 index-linked Gilt, with the bank now one of very few annual ever-presents.
In wider Europe, HSBC maintained its historically strong relationship with the EIB, working on deals that mounted to double figures, including the £1bn tap of its February 2020 FRN that constituted the largest SSA deal of the year away from the DMO. The Council of Europe also again appointed HSBC – for its December 2019 issue.
The German connection continued to function admirably, with the bank active across numerous issues for KfW, including the issuer’s first Green bond in sterling (deals from EIB and TfL underpinned the bank’s SRI credentials). HSBC also maintained its leading bookrunner status with compatriot FMS.
Further north, HSBC lead-managed all three deals from Finland within the awards period: five-year transactions in November 2014 and 2015 and a three-year in February.
Add to this trades for EDC and AfD, not to mention KommuneKredit’s debut in the currency, and the list becomes all the more impressive.
“The simple truth is that we do the plain vanilla issues extremely well,” said PJ Bye, global head of public sector syndicate.
While those among the domestic borrower base might be viewed as likely to be frequent issuers by nature of their domicile, this is not necessarily the case.
This was certainly true in covered bonds, where HSBC brought Lloyds Bank to the fixed-rate arena for the first time since 2012 – selling 52% of the paper into Asia into the bargain – while also ushering in Leeds Building Society for the first time in three years. This was one of a slew of three-year FRNs that included compatriot Abbey, as well as overseas visitors RBC, TD, BMO and CIBC from Canada and Sweden’s Stadshypotek.
“On the right day, sterling can represent great diversification as well as competitive funding versus other currencies,” said Hugo Moore, head of frequent borrowers/covered bonds.
This was also evident in the senior market, where HSBC led Rabobank’s first fixed-rate deal since 2012 and Wells Fargo returned, while Westpac NZ made its debut and Pohjola Bank diversified even further, with a dual-tranche fixed/floating approach.
Nationwide had waited even longer – since 2009 – before making its return to senior, although it was the subordinated sector in which HSBC made a domestic splash, with the likes of Aviva’s first dual-currency hybrid since 2008, Prudential’s T2, Co-op Bank’s post-recapitalisation trade and Centrica’s rating-affirming 60NC10.
Overseas corporates such as Apple, IBM, Daimler, Paccar, APT Pipelines and GE were just some that trusted HSBC on the investment-grade side of the equation, while homegrown high-yield issuers such as Anglian Water, Virgin Media, New Look and House of Fraser added further to its roster.
Throw in a smattering of liability management trades (Phoenix, National Grid, Thames Water, Finnmeccanica), some infrequent housing association and university borrowers, and the picture becomes more complete.
As Ulrik Ross, global head of public sector DCM, said, HSBC has a “mature, diversified business model with breadth of approach”.
In short, a global view with a domestic focus.
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