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◆ Hyperscaler sets new standard for European corporate bond market

◆ What it will it take to get a bank to issue in euros again

◆ Iran war could reshape ultra-competitive Gulf capital markets

For bond issuers to keep away from the primary bond market after a shock, like the outbreak of the war with Iran, is not unusual. But it is when only one group is steering clear when every other is issuing.

For understandable reasons, there have been no bonds from the Middle East since the US and Israel began their attacks, of course. But there has been issuance from elsewhere in emerging markets. That only leaves banks issuing in euros as yet to register a deal in that time.

It's even more curious when they are issuing in dollars and printing covered bonds. We examine why they are holding back and discuss how they might return.

There was still plenty for investors to buy in Europe's credit markets, however. Not least was Amazon's multi-tranche blockbuster, its debut in euros. We uncover what the deal meant for investment grade corporate issuance in Europe.

Finally, we discussed the changing investment banking landscape in the Gulf and how the war raises fresh questions about how sustainable the ledning and bond business is in the region.

Click here to find out more about our GC Live event on corporate hybrid capital, taking palce in London on March 24.

Now read on...

Market debates FIG funding future in euros as primary drought extends

Amazon's €14.5bn money magnet redefines what is possible in credit

Iran war brings Gulf capital markets' competitiveness into question

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◆ How banks and bankers are operating in the region under threat of military escaltion

◆ Bond issuance to resume — but how?

◆ Dwindling fee pool poses questions over long-term future for banks

The Middle East bond market as been one of growing volumes for the last decade and banks both local and international have been pouring resources into the region to grab a slice of the action. But the outbreak of the Iran war last week has temporarily shuttered issuance.

We reveal what bond bankers in the financial centres of Dubai and beyond are saying about their market and how they are operating amid the conflict.

We also talk about which issuers could reopen the primary market in the Gulf, when they might be able to do it and what they will have to pay to do so.

But we also take a longer term view. The Middle East bond market may be busy but it is also one of seemingly diminishing fees. We ask how long banks and their staff can commit to such an enterprise, especially when the security risk of dong so appears to have ramped up.

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◆ UAE issuers leave emerging markets lable behind

◆ What Blue Owl can teach about private credit for the masses

◆ A bump in the road for UK bridging lenders on the way to securitization

Abu Dhabi was in the bond market this week just two days after JP Morgan confirmed that issuers from the UAE would be removed from its benchmark Emerging Markets Bond Indices (EMBI) by the end of March. We look into what EMBI exclusion means for Abu Dhabi and other UAE credits.

We also discussed the recent situation at Blue Owl, which met with a wall of redemption requests from investors worried about the imapct of AI on the software companies that its private credit funds lend to. We discover what lessons private credit and investors can learn about investing in illiquid assets.

Finally, we discuss the future of UK bridging loan companies. It is a market awash with small lenders, two of which recently went into administration. But it had also been an asset class that had appeared to be making inroads into securitization. We look at the best way forward for the industry in light of those developments.

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◆ How AI threat to software biz threatens stockmarket listings...

◆ ... and collaterlised loan obligation market

◆ AT1 market hits new record tight but buyers turn away

Investors are wary that recent AI upgrades — notably Anthropic's latest Claude Cowork agent — are a threat to the software as a service (Saas) sector. This is causing headaches for Saas businesses looking to do an IPO this year as well as the private equity companies that often sponsor them. We examine the threat and what it means for equity capital markets.

Loans made to software companies are also a big part of the collateral for CLOs and here too underlying asset prices are suffering as the same AI peril prompts a cheapening in their value. But that's not the CLO market's only problem. The value of loans made to chemical companies is also on the slide. We discuss the impact on CLOs as an asset class.

Finally, after an incredible run in the additional tier one (AT1) market, a bank has issued one with a reset spread tighter than the psychological barrier of mid-swaps plus 300bp. But there are signs that the market is becoming too rich for some investors. We take a look at this week's landmark deal and look at where next for AT1 issuance, the most subordinated layer of banks' capital structures.

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◆ Why emerging market issuers are doing less in dollars

◆ Republic of Congo — located between rock and hard place

◆ The GlobalCapital Podcast was brought to you by the numbers 17, 100 and the whole Alphabet

Emerging market issuers are diversifying away from dollar funding. We examine which currencies they are looking to raise debt capital with and what is driving them out of the dollar market.

We also dissect the tough choices the Republic of Congo was faced this week as it priced its debut Eurobond at an eye-wateringly high yield. We discuss the sustainability of that sort of debt and what the country's funding options are now.

If there is one thing the US big tech firms like to do, it's disrupt. They grew fat on disrupting old ways of social interaction and doing business and now they're at the forefront of the disruption AI will bring. To fund the enormous amounts of capital expenditure that AI infrastructure requires, they're now disrupting the capital markets too.

Alphabet this week priced 17 tranches of bonds in three currencies to raise more than $31bn-equivalent. That's impressive enough but it showed that in the sterling and Swiss franc bond markets that incredible feats were possible — and from an issuer at the centre of what may prove to be a bubble and which does not have a long track record of issuing in any currency.

Among five sterling tranches, which raised £5.5bn, was a 100 year bond. Meanwhile, its Swiss franc sale has surely alerted other issuers to the size of funding available in that market. We discuss it all.

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◆ Bond auctions get the fintech treatment

◆ Oracle shows how to fund AI capex with bonds

◆ Banks plough on in bonds despite weaker markets

There's nothing new about auctioning bonds as a means to distribute them but this week, fintech BondAuction was involved in a deal for The Housing Finance Corporation that brought new technology to the idea and introduced it to a new section of the market. We discussed how it worked, how it was receieved and whether it will catch on as an alternative to traditional syndication away from the government bond market.

Another big tech theme in the capital markets is how they will accommodate the tech giants' needs for large volumes of debt to fund their AI capex plans. Oracle showed the way with a stunning $25bn bond syndication this week but moreover, it set its stall out for investors the day before, telling them in advance just what it was going to issue.

Like auctions, being clear about issuance plans may be common practice in the sovereign bond market but it was an unusual experience for the corporate mart. That said, now that some of the hyperscalers have borrowing needs akin to some European governments, we thought it seemed a sensible way to behave.

Finally, we looked at the bond market for financial institutions and wondered what could possibly derail issuance there given how strong deal execution has been, even as market conditions falter.

We were also joined by our sponsor MarketAxess's global head of emerging markets, Dan Burke. He spoke to us about developments in the EM bond market and how the electronic bond trading platform his company operates is evolving.

Read on:

https://www.globalcapital.com/article/2fy4nee9yc76lol9nn474/people-and-markets/bondauction-seeks-market-users-willing-to-rethink-syndication

https://www.globalcapital.com/article/2fxsn91h1dgvfuzud1af4/corporate-bonds/high-grade-and-crossover-bonds/oracle-dollar-deal-offers-vision-of-the-future-for-ai-capex-funding

https://www.globalcapital.com/article/2fxy9fidfbtfcbky574lc/people-and-markets/leader/be-less-delphic-with-your-funding-plans

https://www.globalcapital.com/article/2fy424v8m71jpvpfcx1xc/fig/fig-market-faces-uncertain-future-despite-rousing

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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.