The GlobalCapital Podcast GlobalCapital

◆ Supranationals speak on callable capital 
◆ Bank funding: pricing reset 
◆ The demise of the cornerstone investor

As the great and the good of the development finance world gathered in Washington, DC for the World Bank/IMF Spring Meetings, multilateral development banks published details about their callable capital, the next vital step along the way to powering up their lending to solve some of the planet's most urgent problems. We digest what they said and why it matters.
In the FIG bond market, issuers decided to postpone new issues as rates volatility gripped the market. We figure out when they will be back and how much extra they will have to pay for the funding.


Finally, equity capital market experts think the IPO revival is strong enough to do away with cornerstone investors. And what do the cornerstones think of that? Listen in to find out (spoiler alert: they're not exactly tearing up the paving stones over it).

◆ Why everyone from nuns to pro-coal US state treasurers are giving banks stick over ESG 
◆ El Salvador's punchy new debt structure 
◆ Appetite for duration in covered bonds

West Virginia: almost heaven unless you're on state treasurer Riley Moore's list of banks the state won't do business with over fossil fuel financing. But unlike most ESG-related exclusions, in this case opprobrium is reserved for financial institutions deemed to be anti fossil fuel.
Bank of Montreal has dodged making the list in a week where four others were added. But the pressure on banks to behave a certain way over ESG is mounting on both sides with some nuns in the US taking Citi to task over what they see as exploitation of indigenous people.
We look into what this means for banks picking a treacherous route to building their ESG credentials while trying to make money serving traditional clients. We also examine what investors in their bonds think.
Investors had another tricky consideration to make this week as El Salvador issued a funky new structure as it looks to beat its debt distress. We examine the new bonds and what the market reaction to them.
Finally, we discuss the growing appetite for long dated covered bonds.

◆ Do investors want unified capital markets coverage?
◆ Corporates fear democracy
◆ Why are FRNs trending?
◆ Second lien mortgages in arrears ― yes please
Banks’ urge to cut costs in debt capital markets, especially syndicate desks, is prompting some to call for the ‘global capital markets’ model: one team for equity and all kinds of debt.
They argue this could heal banks’ disjointed thinking and allay investors’ frustration that they have to say the same thing to five different bankers at every firm. But there are plenty of sceptics...
Few in the corporate bond market expected its rally to last into this year, still less the second quarter. But here we are and it’s still running. A motley bunch crammed into the market this week and found a great reception. As Mike Turner explains, they’re partly packing the funding in to avoid this year’s great big risk event: the US election.
Floating rate notes are the natural product for banks to issue, but normally they don’t much, because most investors prefer fixed rate bonds. So why are investors gagging to buy floaters now, just when everyone agrees interest rates are about to fall? Sarah Ainsworth goes through the ins and outs.
Second lien mortgages are the kind of — shall we say 'challenging' — collateral familiar from the US securitization market, but as George Smith and Victoria Thiele highlight, the UK has produced four deals in the past five months. The latest, from Equifinance, had some pushback in the market, but investors were only joshing and bought it in the end. We ask if lower ranked mortgages are the hot new asset class.

In the second part of GlobalCapital’s exploration of how bond syndicate desks are changing, after a swathe of the discipline’s senior bankers have been made redundant, we discuss the syndicate job itself.
Technology and market transparency have stripped away some of the grunt work, but also made knowledge easier to come by. Are banks thinking they don’t need so much experience on desks?


Bankers admit pricing bonds has often become more routine. But when markets get difficult, or situations do, as with Equinix’s recent pulled deal, you need experience.


We also talk to Ana Fati and Mike Turner about the latest plunge down for Thames Water after shareholders refused to put in much needed equity. What are bond investors and lenders thinking about the UK water sector?


And it’s been a huge week for African bond markets, with Zambia finally getting its official creditors and bondholders to agree to a restructuring. This one is meant to be tougher to bondholders, but if Zambia does well economically, it will have to pay extra. George Collard explores whether that is a good thing, or will prove a burden.

◆ MUFG's Del Canto and SG's Menzies on what comes next for capital markets
◆ The juniorisation of syndicate desks
◆ Two deals pulled despite fantastic markets

It was only a few months ago that GlobalCapital asked more than 50 of the bond markets' most senior bankers where they thought the primary markets were headed in 2024 for our Review 2023|Outlook 2024 special report. This week, two of them joined us on the podcast to see which predictions had come true and what comes next for issuers and investors after what has been a stellar start to the year for bonds.

Fabianna Del Canto is MUFG's co-head of capital markets in the EMEA region. She has worked in syndication and origination for over 20 years and jointly runs the Japanese firm's business in the investment grade, structured, leveraged and emerging markets.
Andrew Menzies is Societe Generale's global head of debt capital markets. He has been at the French firm since 2003, working with clients across the Americas — during a stint in New York as the bank's head of DCM for the continent — the UK and Ireland, the Netherlands and Scandinavia.


But as good as markets have been for issuers this year, there were two stark reminders that access to bond funding can never be taken for granted. Two issuers hooked their deals right in the middle of book building — Equinix and Raiffeisen Bank International. We examine both cases to see what went wrong.


We also look into why some of the most senior syndicate bankers in the Street are leaving their jobs and being replaced by more junior staff.

◆ The UK is about to embark upon a new, higher funding remit with a key part of its investor base dwindling 
◆ Why the FIG bond market is so strong and why it will stay that way 
◆ If investors are still leaving EM bond funds, who is buying record amounts of issuance?

The UK plans to sell £28bn more Gilts from April — the start of its financial year — than last year, at £265.3bn. As a bond issuer, it has been able to rely on what some have called a captive investor base, in particular UK pension funds that cannot buy long-dated sterling assets in such volumes from anywhere else. But their demand is falling. We explain why, and how the UK's Debt Management Office will adapt.


Whatever the future holds, it did not stop the UK from achieving a record order book for a syndication this week. And credit markets are going great guns too. We look at what is driving demand for bank bonds in euros an spot an opportunity for issuers that may be able to do something a little different.


We also investigate the riddle of emerging market bonds — if dedicated funds keep suffering net outflows, then who is behind the record volumes and deal sizes? And what will it take for net inflows to return to the asset class?


You can subscribe to this podcast by hitting any of the buttons below, or by following us on YouTube, using this link.