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April 2008 | ifr special report | 1 NON-CORE BOND MARKETS ROUNDTABLE


Editor: Matthew Davies Special Reports editor: Solomon Teague Co-Chairs: Philp Wright, Michael Winfield


Participants: Sjaak-Jan Baars, Rabobank Paul Johnson, RBC Capital Markets Moti Jungreis, TD Securities Holger Kron, Deutsche Bank Isabelle Laurent, EBRD Alexander Liebethal, KfW Horst Seissinger, KfW David Smith, JPMorgan


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they have experienced to their plans in the more developed currencies. While perceptions of illiquidity and questionable infrastructures have


FOREWORD A


not evaporated, many of these fledgling markets have proved themselves more than able to hold their own when it comes to offering investors a stable platform on which to operate, from purchase to sale (or maturity). There has been little in the way of panic, perhaps because those involved in this sector are more used to oscillations and therefore have not reacted with the same degree of panic often seen elsewhere. For investment banks too, it has become an area that it is difficult to ignore, and it has become noticeable over recent times that those looking to get involved understand that to survive and succeed they must offer a full service across all the moving parts that combine to create the sector. To quote a couple of bonds with no underlying commitment to the market simply will not suffice any more – if, indeed, it ever did. While there is opportunity attached to involvement during crises, there is also danger, and any investment bank tempted to get involved for anything but the purest of reasons runs the risk of being found out quickly. For those with long track-records of service, the rewards can be con- siderable, however, as the asset class attracts newcomers from both the investment and issuer communities while maintaining its importance with established participants. The sector has not been without its stresses and strains, although,


for once, this has not made it any different from any other area. But from the more developed markets, such as the non-core dollars of Australia, Canada and New Zealand, to the emerging currencies of Africa, and everything in between, the market has performed relatively well, in spite of the occasional hiccup from currencies such as the Icelandic krona. While historically viewed as a peripheral exercise by a number of participants, there is now a sense of genuine commitment from all sides, from investors, underwriters, issuers and the governments under whose jurisdiction they operate, and the dominant theme is that of infra- structure. Not only does this cover the commitment of local governments to establish a stable environment in which participants can operate and the construction of liquid interest rate and swap curves but it also relies on a similar dedication from the investment banking community to play its role in maintaining liquidity and treating the market with respect rather than as an opportunistic sideshow. Issuers too have their role to play, not only by a responsible approach but by demonstrating similar commitment. If all these things align, there is huge potential for all concerned. While


those who do nothing more than hang around the edges might see little that enriches them and might even get burned in the process, for those that remain loyal to the cause, the rewards look set to remain high.


lthough the non-core bond markets continue to be dominated by borrowers from the SSA sector, it is an area that is fast becoming key in other issuers’ thinking, not least because of the disruption


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