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2 | ifr special report | October 2010 Contents

Editor: Matthew Davies Editor, this report: Solomon Teague

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10 The party’s not over In contrast with the middling performance of the European debt capital markets, the US bond market continues to thrive. Yankee and domestic issuers are tapping into the highly liquid US investor base and taking advantage of the attractive interest rates, while issuers are enjoying funding near historical lows and continue to push out their maturities. Borrowers see no immediate prospect of an end to the party.

12 Unanswered questions The publication last month of the Basel Committee’s core capital requirements provided much-needed clarity on some aspects of the debt side of the bank capital market. But others, especially the role of contingent capital, still await elucidation. While key aspects of the new regulatory landscape are yet to be revealed, market participants are beginning to make assumptions about how the market will look in future.

14 All grown up The European high yield market is coming of age. A broader range of companies are looking to extend debt maturities and refinance loans with bonds, while a strained banking community continues to restrict its corporate lending activities. But can the market ever reach the same level of maturity as its US equivalent?

16 Sovereign revival After a couple of fallow years CIS Eurobond issuance returned with a vengeance in 2010. Russia, Ukraine and Belarus took full advantage of growing investor appetite with a combined US$8.5bn of supply. Russia and Ukraine look set to become annual issuers, but smaller states are unlikely to follow Belarus’ debut offering anytime soon.

18 Reaching new heights International bond issuance volumes out of Latin America are set to break records this year. Borrowers are returning in droves, tapping everything from core US dollar markets, to perps and local currency plays. Some investors have been calling a peak to the euphoria, but bankers reckon it will continue, albeit at a slower pace.

20Opening the GATE Amidst the ongoing sovereign debt problems in Europe, Japan has drawn the attention of emerging market sovereigns as an alternative funding source, thanks to a guarantee programme provided by the Japan Bank for International Cooperation.

4Learning on the job The measures employed by the European Central Bank to support both the covered and peripheral bond markets ultimately shared a common objective: providing aid to the ailing European banking sector. The outcome of the two programmes, on the other hand, has so far been mixed, as the performance of the underlying debt markets demonstrates.

8 Thriving hybrids The corporate hybrid market is enjoying a mini-revival having reopened last month in Europe amid a great deal of fanfare. The structure offers obvious benefits for issuers and investors alike in the current low interest rate environment. Bankers are braced for one of the busiest periods for corporate hybrid issuance since the onset of the credit crisis in 2007.

Front cover photo credit: Reuters

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