Low yields lay track for repack ramp-up
4HEûDECLINEûINûYIELDSûTOûALL
TIMEûLOWSûHASû
helped fuel substantial growth in the bond
repack market, crowned by a surge in
issuance from relatively newly established
MULTI
DEALERû306û3PIRE
"ONDûREPACKSûAREûBACKEDûBYûEXISTINGûDEBTû
SECURITIESûANDûISSUEDûBYûBANKRUPTCY
REMOTEû
306Sû4HEûCASHmOWûFROMûTHEûUNDERLYINGû
security is channelled via a swap
counterparty to typically change either the
coupon or currency. By use of repacks,
INVESTORSûCANûMAINTAINûCREDITûEXPOSUREûWHILEû
enhancing or tailoring a coupon to their
SPECIlCûNEEDS
)NûAûLOW
RATEûENVIRONMENT ûSEVERALûBANKERSû
have said they have seen an increase in
APPETITEûFROMûINVESTORSûFORûALTERNATIVE ûYIELD
enhanced debt products such as bond repacks.
Bankers have said one of the primary
drivers of activity has been the paltry yields
on offer in more mainstream products. One
banker active in repacks has observed a
doubling in client activity compared to the
lRSTûHALVESûOFûûANDû
4HEûINCREASEDûACCEPTANCEûBYûINSTITUTIONALû
investors of repack products, spearheaded by the
Spire platform, was another area cited as a
SOURCEûOFûGROWTHû!LSO ûTHEREûHASûBEENûREGULATORYû
pressure on alternative products, such as the
INCREASEDûCOSTûOFûHOLDINGû/4#ûSWAPSûDIRECTLYû
because of greater margin requirements.
!ûCLEARûILLUSTRATIONûOFûTHEûGROWTHûINûREPACKSûHASûBEENûTHEûOUTPUTûOFûMULTI
DEALERûREPACKû
issuing platform Spire, which began issuing in
û4HEû,UXEMBOURG
LISTEDûVEHICLEûHASû
ISSUEDûOVERû53BN
EQUIVALENTûOFûREPACKûNOTESû
THISûYEAR ûMOREûTHANûDOUBLEûTHEû53MûITû
ISSUEDûDURINGûTHEûENTIRETYûOFû ûACCORDINGû
to Eikon data.
4HEûPLATFORMSûLARGESTûPRINTûCAMEûINû*UNE û
WHENûITûSOLDûAûõMû
YEARûNOTEû
collateralised with a Deutsche Wohnen
û*UNEûû4HEûREPACKûPAYSûAûmOATINGû
COUPONûLINKEDûTOûTHEû
YEARûFORWARDû#-3û
RATEû4HEû#-3ûRATEûISûAûPRODUCTûTHATûEMERGEDû
last year to cater for bespoke demand from
European insurance companies.
Edward ClarkSpike in trading outpaces growth
in US corporate debt market
In a reversal of recent trends, growth in
TRADINGûVOLUMESûINûTHEû53ûHIGH
GRADEûANDû
junk bond markets outpaced the increase in
NEWûDEBTûDURINGûTHEûlRSTûHALFûOFûTHISûYEAR û
ACCORDINGûTOûAû*0û-ORGANûREPORT
New technology has investors and dealers
changing their trading patterns, and a greater
use of liquid credit products among asset
managers has also bolstered secondary volumes.
4RADINGûVOLUMESûINû53ûHIGH
GRADEûANDû
junk bonds in the secondary market
INCREASEDûûANDû ûRESPECTIVELY ûVERSUSû
THEûSAMEûPERIODûINû
4HATûCOMPARESûTOûANûINCREASEûINûTHEûSIZEûOFû
THEûOUTSTANDINGûHIGH
GRADEûMARKETûOFûJUSTûû
ANDûAûDROPûOFûûFORûTHEûVOLUMEûOFûOUTSTANDINGû
HIGH
YIELDûDEBT ûTHEûBANKûSAIDûINûTHEûREPORT
“Over the longer term, trading volumes have
grown more slowly than the amount of bonds
OUTSTANDING ûBUTûINû(ûTHISûTRENDûREVERSED vû
*0û-ORGANûANALYSTSûWROTEûINûTHEûREPORT
4HEûBANKûATTRIBUTEDûTHEûJUMPûINûTRADINGû
volumes to a strong rally earlier in the year
and increased volatility driven by
international trade tensions.
!TûTHEûSAMEûTIME ûTHEûPACEûOFûNEWû
issuance in the primary market has slowed
PARTLYûDUEûTOûAûDECLINEûINû-!ûACTIVITYPRICING CHANGES
4ECHNOLOGYûANDûNEWûPRODUCTSûAREûALSOû
changing the dynamics of trading.
Investors and dealers are now increasingly
willing to trade entire portfolios based on
third party pricing at the end of the day,
RATHERûTHANûONûAûBOND
BY
BONDûBASIS
h-OREûCONlDENCEûINûTHEûACCURACYûOFûTHIRDû
party pricing services has helped bothinvestors and dealers in pricing portfolio
trades,” the bank said.
h4ECHNOLOGICALûPROGRESSûHASûALSOû
contributed to the ability to trade several
dozen or more line items at one time.”
)NûTHEûlRSTûHALF ûTHEûHIGH
GRADEûMARKETûSAWû
ABOUTûûOFûSUCHûPORTFOLIOûTRADES ûûMOREû
than the amount seen for all of last year.
!LSOûDRIVINGûTHISûTRADINGûTRENDûGROWTHûINû
CREDITû%4&ûTRADINGûANDûTHEûLIQUIDITYûGAINEDû
FROMûOTHERûCREDITûINDEXûPRODUCTS
&ORûEXAMPLE ûTRADINGûINûTHEû
YEARû#$8)'û
INDEXûDURINGûTHEûlRSTûHALFûJUMPEDûûCOMPAREDû
TOûTHEûSAMEûPERIODûLASTûYEAR ûWHILEûTHEûTHREE
YEARûINDEXûSAWûAûûYEAR
ON
YEARûINCREASE
!SSETûMANAGERSûHAVEûNOWûBECOMEûTHEûMOSTû
ACTIVEûUSERSûOFûVARIOUSûINDEXûPRODUCTS ûNOWû
ACCOUNTINGûFORûûOFû#$8ûINDEXûTRADINGû
ACTIVITY ûUPûFROMûûINû û*0û-ORGANûSAID
!VERAGEûVOLUMESûONûHIGH
GRADEû%4&Sû
JUMPEDûûYEAR
ON
YEARûTOû53BNûAûDAY û
WHILEûAVERAGEûHIGH
YIELDû%4&ûVOLUMESû
INCREASEDûûTOû53BNûAûDAY
Paul KilbyWho’s moving where...
ICBC’s head of
global loan
syndications is joining
the Asian
Infrastructure
Investment Bank.
Benny Zachariah is due
to start at the China-
led development bank
in September as
investment officer for
financial institutions
and syndications. He
will be based in
Beijing. Zachariah has
spent the past six years
at China’s ICBC, based
in London. He was
initially hired in 2013,
and previously worked
at WestLB. Annabelle Mooney is
joining JP MORGAN to
lead its corporate
client banking and
specialised industries
team within the
Australia commercial
bank. Mooney was
previously head of
financial sponsors at
Bank of America
Merrill Lynch before
leaving in 2017 to takeup a similar role at
PwC. She was one of a
number of bankers in
Australia to switch to
the Big Four
accounting firms,
which have been
making inroads into
advisory. Mooney
spent four years at
BAML and has also
worked at Nomura and
Goldman Sachs. DEUTSCHE BANK’s
Sebastien Cottrell has
assumed responsibility
for securitised products
trading globally
following the departure
of John Hanisch, a
source said. Cottrell
most recently served as
head of US collateralised
loan obligation trading. Solita Marcelli has
joined UBS as deputy
head of its chief
investment office in the
Americas. Marcelli, who
will start in October,
will join from JP
Morgan’s wealth
management business,
where she was global
head of fixed income,
currencies and
commodities.h4HISûBUSINESSûOCCUPIESûANûATTRACTIVEûPOSITIONûINûTHEû
PROlTABLEû53ûMARKETûANDûISûGAININGûMARKETûSHAREv
BERENBERG ANALYST PETER RICHARDSON ON BARCLAYS’ INVESTMENT BANK, P