Deals Intelligence with Matthew Toole of the Deals Intelligence Team at Thomson Reuters for the week of 06-24-08
Transcript:
I'm Matt Toole with the Investment Banking Division of Thomson Reuters and this
week's Deals Intelligence on trends in the US investment grade credit markets.
The weakness in the global economy continues to weigh on the market for debt
new issues during the first half of 2008 as volume has fallen to its lowest levels in five
years. For year-to-date 2008, investment grade debt underwriting totals $487 billion
dollars, a 7% decrease from last year at this time, which ranked as one of the busiest
six months for underwriting activity on record. Globally, the depressed levels of
debt capital markets activity starting out the year marked the lowest quarterly
dollar volume for debt new issues since the third quarter of 2003 and the lowest number
of deals since the fourth quarter of 2000. As the environment for new deals remained
uncertain, investors fled to safety. New issues from federal credit agencies, with an
implied US federal government guarantee, have seen an increase of 86% over the first
quarter of 2007 and were the only advancing asset class over the past quarter. Battered
by the US sub-prime mortgage crisis, the market for asset-backed and mortgage-backed
securities, which includes collateralized debt obligations or CDOs, registered an 82%
decline over last year at this time.
Now over the past year, the Federal Reserve has undertaken an aggressive stance on
interest rate policy, which seems to have filtered down to the market for high-grade
new issues. In May of this year, the market for investment grade bonds saw its busiest
month for new deals ever, with over $140 billion in new offerings. It's not clear whether
this trend will continue as we move into the typically slow summer months and the
beginning of second quarter earnings season.
With the shifting economic environment, we've also begun to see a shake-up in the
composition of what we term the "deals economy", that is the financial advisors,
underwriters and law firms whose combined efforts bring new deals to the markets.
The largest shift has been in the US debt capital markets, where JP Morgan ranked first
for investment grade debt underwriting for the first time ever during the first quarter of
2008 with $27.3 billion dollars. Citi, which had held the number one ranking for 31
consecutive quarters fell to second place with $25.8 billion dollars in underwriting
assignments and its lowest ranking since the first quarter of 2001. As we look ahead to
the upcoming first-half rankings from Thomson Reuters which will be released on
Monday June 30th, the race for first place in investment grade underwriting is closer than
ever, with JP Morgan and Citi separated by less than half a percentage point. Be sure to
check our quarterly investment banking rankings available at thomsonreuters.com/league
to see the final outcome.
<< Back to article
