2. Debt Capital Markets – Pricing will be key to attracting bond investors in 2019
While 2018 was a relatively good year for global high yield bonds, investment grade issuance was down across all markets, reports Baldini. As we go into 2019, concerns such as international trade talks, the slowdown of growth in China, political upheaval across Europe and the end of quantitative easing in Europe will continue to hold back borrower activity – particularly in sterling and euro-denominated debt, he forecasts.
Likewise, many portfolio managers have reduced their bond buying to avoid incurring further losses as credit spreads continue to widen. To get deals done in early 2019, therefore, issuers will need to be extremely flexible on pricing to encourage these defensive investors to support their transactions, Baldini says.
Despite these challenges, Barclays sees a lot of money ready to go into debt capital markets. Baldini is confident some good issuance windows will present themselves to those borrowers eager to make up for lost time. But in both investment grade and high yield markets, pricing and realistic risk premia will be key to attracting investors, he says.