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◆ Scottish government bonds near

◆ CLOs and private credit

◆ Corporate hybrid debt reaches new tights

Scotland is looking for banks and lawyers to help bring its first bond to market. But the idea raised a number of questions at GC Towers this week. Firstly, what is Scotland? Is it a sovereign issuer, a sub-sovereign, or something altogether new?

Not only did we wonder what investors would be buying but we also questioned what Scotland was selling and why it wanted to do so. Scotland will be a fascinating new issuer in the bond markets and so we discussed what the capital markets have been telling us this week about its desirability as an investment, its credit, how it will be priced and what sort of bond it should issue.

We also investigated the relationship between the public CLO market and private credit. Many think the latter will devour public debt markets but we discovered that the relationship between direct lending and the CLO market is far more symbiotic.

Finally, we revisited the market for corporate hybird debt. A deal for an Italian utility company this week came at a record tight spread to the issuer's senior debt. We examined what has been driving this tightening trend and whether the spread between subordinated and senior bonds still reflects the full amount of risk investors are taking on.

Read on:

https://www.globalcapital.com/article/2fx19pvabc8ynyzx2rz0g/ssa/ssa-market-peeps-at-what-lies-beneath-scotlands-kilts (paywalled)

https://www.globalcapital.com/securitization/article/2fx13snp58ab2tnaepfcw/securitization/clos-europe/clos-find-unlikely-symbiosis-with-private-credit (paywalled)

https://www.globalcapital.com/article/2fx129ypee26j5vqxlmv4/people-and-markets/leader/private-credit-and-leveraged-loans-are-not-necessarily-rivals (free to read)

https://www.globalcapital.com/article/2fx00wjzrye120l8sjlkw/corporate-bonds/hybrid/hybrid-theory-bankers-question-how-tight-corporate-senior-sub-spreads-can-go (paywalled)

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◆ CSG's IPO and the rampant investment for defence companies

◆ Ukraine issuer back in bond market

◆ Fomo sapiens: investment bankings most joyless

Money is pouring into defence, both from government budgets and from investors in the capital markets. The IPO of Czech defence supplier CSG this week was an extraordinary transaction — the largest European listing to date and the biggest ever from the industry. We dissect the deal, discuss the industry's prospects for capital raising and examine the pipeline of defence sector equity capital markets activity to come.

The Russian invasion of Ukraine in 2022 has been, of course, a major driver of increased defence spending. Meanwhile, it has shuttered Ukraine's borrowers from the bond market. But this week, one of its major bond issuing companies retruned to the primary market for the first time since the war began.

MHP, a chicken and wheat producer, has priced a deal to refinance some maturing debt. We look at what has changed in the almost four years since Russia's invasion for Ukraine in the bond markets, why a company rather than the sovereign was the issuer that reopened the market, and which other borrowers might now do deals.

Finally, we were joined by columnist Craig Coben, to discusss the psychology of working in an investment bank and just how it can be that people who appear to have it all from the outside can often seem so glum — I was looking for a well paid, prestgious job and then I found a well paid, prestigious job; and heaven knows I'm miserable now, as The Smiths might have said had they put down the instruments, picked up a an HP-12C and gone to work for Morgan Grenfell back in the day.

Craig explains his term for the phenomenon — Fomo sapiens — and discusses with us investment banking culture and whether there is a route to a happier existence while still missing the odd client mandate.

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◆ Public sector issuers embrace hedge fund bid...

◆ ... as they flex in the swap market

◆ Car makers welcomed back to bond market

Allocating more of a new issue to hedge funds has long been something SSA issuers have only done if they absolutley needed to. But that is now changing. Issuers are giving more bonds to the so-called fast money but only if it slows down. We discuss which types of hedge funds are getting more SSA bonds, why they want them and what they are prepared to do to get them.

Another important but rarely talked about influence on SSA bond issuance is the swap market. Some issuers are starting to show more flexibility around when they use it to hedge their debt exposures. We discuss the dynamic and what it means for both the derivatives and bond markets.

Finally, we highlight the stellar start to the year for car makers in Europe's corporate bond market. This is an industrial sector that investors have fretted about in the recent past so we examined what is driving demand for their new issues so far this year.