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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.

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◆ What has driven this week's record issuance and what might threaten sentiment

◆ Why the Maduro affair is a wake-up call for the EU

◆ Resolving Venezuela's debtberg

After a rip-roaring start to the bond market this week, we take a look at just how good it is for issuers and what has driven the huge volumes. Sure, the Epiphany holiday on Tuesday pushed issuers to do their euro funding in a particularly narrow window, but greater forces are at play across the rest of the market.

We examine that issuance through the prisms of the sovereign, supranational and agency bond market and also that for CEEMEA issuers. We explain why carrot and stick are driving the latter group to fund at such speed.

One of those factors is geopolitical shocks and this week the US provided at least two. It arrested the Venezuelan president Nicolas Maduro and said it would "run" the country instead of him. That raised fears that it might try the same in Greenland. We make the case for why this should drive the EU to push the euro's status as a global reserve currency.

Finally, we look into Venezuela's vast debts — the bits we can see at any rate — and discuss the likelihood of restructuring now that Maduro is gone.

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◆ Data centres: crunch time for Europe's capital markets

◆ How AI is changing capital markets work...

◆ ... and hiring

It is no secret that data centre financing will be an increasingly important part of the capital markets in the years ahead. But this week we discuss why it is such a vital test for the EU's capital markets and the bloc's overall competitiveness as we contrast the progress in data centre securitization between the Europe and the US.

We also take a close look at the changes AI is making to how people in the capital markets do their jobs. Despite all the talk of distributed ledger technology and digital bonds, the most senior debt capital markets bankers believe AI will be the biggest disrupter to tehir world of the choices offered in GlobalCapital's recent survey (they also say DLT is the most overhyped of the options). We discuss exactly how AI is being used in the markets and assess its potential.

These stories, along with the survey of the heads of DCM are just some of the features in our Review 2025 | Outlook 2026 special report, which is free to read. It contains outlook pieces based on surveys of all of the major markets that GlobalCapital covers as well as interviews with some of the markets' biggest bond issuers and stories about the biggest themes that will affect capital markets in 2026.

Read it here: Review 2025 | Outlook 2026

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◆ Simplification plans boggle bank boffins

◆ Hungry, hungry hyperscalers to push utilities into bond market

◆ A loan in the sand: private credit jostles for place in Middle East debt markets

On last week's episode we discussed how the ECB was preparing to recommend simplifications to the way EU banks are regulated, in order to make them more competitive and to drive growth. This week it made its recommendations but they seem far from simple and contain suggestions to abolish the most subordinated layer of bank capital altogether — additional tier one.

We delve into what the ECB said, experts' reactions to the news and discuss what changes will follow.

The demand for data centres and their thirst for energy is likely to lead to another bumper year for Europe's corporate bond market. But it won't just be the big US tech companies bringing deals. Utility companies are also expected to raise cash for capex as they power up their grids to feed the big data beasts.

Finally, with private credit seemingly spreading its tentacles into so many debt markets, we take a look at how it is gaining a foothold in the Middle East, where the need to raise capital is ballooning, and assess the threat it poses to public markets.

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◆ Private credit and equity to come under oversight for first time...

◆ ... as Bank of England eases burden on banks...

◆ ... amid global shift to lighten up on lenders, with ECB expected next

Alternative asset managers will finally come under the Bank of England's scrutiny, the central bank and regulator said this week. We discuss in detail how that will work and what the implications for the ballooning sector may be.

Two days before it announced its plans, the BoE also lightened the regulatory load on the banks under its supervision — for the first time in a decade. We examine the relief on offer and whether it will affect the issuance of subordinated debt.

We also consider the changes in their global context, with the EU and the US also looking to make their banks more competitive and better able to drive economic growth. We look at what the ECB might be about to reveal next week.

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◆ UK government guns for growth but did it miss?

◆ French fancy: FIG in favour again

◆ Pandas and Wontons with the AIIB

After months of speculation, the UK government delivered its Autumn Budget this week. The country may have felt like it has been through the worst of times but are we about to enter the best of times? We pick through the policies to see how they will affect capital markets from IPOs to retail investment.

In the immediate future, market participants are tipping sterling bonds to appear from corporate issuers. We discuss the pipeline of deals to come.

We also discuss another country where there has been plenty of political intrigue and economic strife: France. A number of French banks recently came to the bond market with successful new issues. We examine what that tells us about investors' and issuers' view on French risk.

This episode of the GlobalCapital Podcast is sponsored by the Asian Infrastructure Investment Bank. In a special interview, we spoke to the bank's head of funding, Darren Stipe about its role in the Panda bond market, and it's creation of the nascent Wonton market.