A recent article in the financial press has highlighted an oddity in the way current UK corporate bond markets are behaving. On the one hand, cross-currency swaps are expensive and the pricing power of the largest sterling investors is keeping spreads wide but constraining supply; on the other, investment strategists are suggesting that the relative credit play is selling Euro-denominated non-financial corporate bonds and buying sterling ones. Expectations therefore are that there will be a 35-40% decline on last year’s sterling issuance figure. To be fair, there’s also an expectation that the Euro-denominated corporate markets will also see a reduced
Losses/value destruction will arise if/when (long-term) interest rates rise and (fixed rate) bond prices fall, or so many commentators are warning.I don’t see it entirely like that. I think that that idea is giving far too much weight to mark to market valuation during the holding period or too much preoccupation with bond traders.
“LCR”: corporate business significantly less unattractive for banks
In the UK it is possible, as an individual, to have a basic bank account for free (as long as you stay in credit). The concept was introduced by Midland Bank in 1984 and was followed by almost all the other providers. The concept was, of course, that free banking would entice customers in and then that provided an audience to sell to. So customers who opted for free banking would use savings products, loans and mortgages, as well as insurance products such as house insurance, endowments, etc. The bank also had access to interest free deposits. The model is
The press is full of issues around the manipulation by Barclays Bank of their input into LIBOR calculations. They did this to seek advantage to themselves and sometimes to help out some key contacts. The behaviour has been described variously as criminal, illegal or deceitful. Whatever describes it best, the damage done to the reputation of the bank has been high and this must spread to the reputation of other banks, both in the City of London and elsewhere. Employees move relatively freely between banks and while many banks and their employees have very high integrity, this kind of behaviour