Debt Capital Markets
The Financial Times plans to publish this Special Report on October 25, 2012
Advertising booking deadline: September 14th, 2012.
(Advertising copy deadline: October 01st, 2012)
(We plan to include the following features (please note that this list is provisional):
Global debt markets have seen a rollercoaster year. The euro crisis has increased
uncertainty while the US economy has failed to gain traction – forcing bolder
responses by central banks that have pushed official borrowing costs ever lower.
The result has been a search for yield that has boosted riskier corporate and
emerging bond markets – but also created concerns about the way capital markets
are functioning. Inflation worries are re-emerging. With a series of challenges on
the horizon, the tensions are unlikely to ease. The US “fiscal cliff,” a possible hard
Chinese landing, worries about an Israeli attack on Iran – and the eurozone’s
continuing woes – are all on investors’ minds.
2. Eurozone - The Lure of Safe Havens
Northern European countries have benefited from the crisis; their low borrowing
costs are the flipside of the high yields in the “periphery” countries. German
interest rates have even turned negative. The difference reflects a predicable
search for havens. But is there a danger of a bubble emerging? Have investors
fallen into a trap?
3. European Corporate Bonds
The sector has been one of the biggest beneficiaries of the eurozone crisis.
Weaknesses in the banking sector have encouraged companies to turn to capital
markets. But the eurozone remains fragmented, with borrowing costs varying
significantly across the continent.
4. Case Study: Telefonica
The Spanish telephone company illustrates many of the strains – and opportunities
– in the European corporate debt markets. Its bond issues have had a high profile
in capital markets. Although only 30 per cent of its business is generated in Spain,
its national identify means it has had to pay a significantly higher premium than
5. Bank Finance
Facing massive regulatory changes, banks continue to struggle to raise sufficient
finance at reasonable costs. The pressures are leading to profound changes in the
6. How US Bank Bonds have Become a Better Investment than Equities
US bank debt this year has enjoyed a wave of investor popularity. Average yields
for US bank paper are near record lows while the sector has outperformed the
broader market this year. Boosting demand for bank bonds among investors has
been a combination of balance-sheet friendly factors, including higher regulation,
inflow of deposits - which limits the need to issue more debt - and a recent upturn
in the housing market.
7. Money Market Funds
These have been the most obvious victims of the low-interest environment.
Traditional business models of this part of the shadow banking sector have been
undermined on both sides of the Atlantic. Do they have a future? What role will
8. Fixed Income ETF's
These products are changing US bond markets with institutional and, increasingly,
retail investors using them as a way to play the bond markets. ETFs have emerged
as a major source of liquidity at a time when broker-dealers are scaling back many
of their activities. What are the benefits and potential dangers of the rise of the
ETFs, and how might they affect the bond markets when the interest rate cycle
9. US Treasuries and the Outlook for Debt Markets
The “fiscal cliff” of mandatory tax rises and spending cuts after the election in
November is set to determine the outlook for the US economy and by extension,
Treasury yields and appetite for credit risk. The launch of open ended bond
purchases under QE3 by the Federal Reserve could well include Treasury debt in
the New Year, should lawmakers stumble over the cliff and intensify the pressure
on the economy. Some kind of tax and spending deal is unlikely to boost growth
prospects in a dramatic fashion, keeping a ceiling on yields and volatility.
Regulatory pressure is forcing trading on to exchanges. The result has been an
intensification of competition between the world’s largest exchange groups. But
there have also been less desirable side effects – for instance, the increased
demand for collateralisation of deals and exemptions for official-sector
institutions, have created problems in market functioning.
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