Snapshot – The GlobalCapital Survey of Debt Capital Markets Leaders

First, three regular questions we ask each year: forecasts for volumes, costs and variances. This year, we’ve added an additional category – asking people to predict what they think will happen to maturities, given expectations that interest rates will finally start to rise in the US and UK. United.

The picture painted here is a bit grim – most believe volumes will be flat or lower and and fees will be flat or down from 2021. Meanwhile, deadlines are expected to get shorter, but not dramatically. As the last few weeks of the year have shown, there are windows that investors will go longer than expected.

The subject of hiring is still controversial, but especially in 2021, amid the voracious search for talent as the words business and finance came out of lockdown and implemented expansion plans and new strategies. Meanwhile, the impact of Brexit was still being felt, which may be part of why many of our bankers believed the UK would experience small-scale job cuts. But overall, respondents believe 2022 will be another hot year for talent, with hires expected in all of our countries and regions. Goodbye London, hello Dubai?

Global Capital A lot has been heard over the year about the exceptionally strong offering for juniors, with many banks having to replace trading teams multiple times due to the hiring of analysts. For example, we have heard of a bank having to replace a team three times in the life of a particular LBO. According to our survey, however, the offer seems strong for seniors and juniors. Prior to bonus season, the number of senior executive resignations generally decreases. This is not the case this year.

With the strong supply of talent, one would expect compensation to increase, improve retention, and attract new talent. This is somewhat confirmed in our survey, with most respondents expecting directors and CEOs to make more money in 2022 than in 2021, although a large number believed that revenues would be stable. . Meanwhile, the overall team size appears to be staying roughly the same or increasing slightly.

Of course, it’s not just who you work for, but where you work. Before the 2016 Brexit vote in the UK, the choices were limited. In EMEA it was London, with Frankfurt and Paris competing for race status also with Munich, Milan and Madrid. Today, thanks to Brexit and many people choosing to return home during the long periods of lockdown, the capital markets population of the EMEA region is starting to look like a diaspora. According to our survey, Paris would benefit the most from the UK’s exit from Europe, followed by Frankfurt and New York. In the meantime, it appears that relocations out of London are mostly complete, although many of our respondents believe that future Brexit upheavals cannot be ruled out as they depend on the stance taken by regulators.

While Brexit seems (mostly) done from an offshoring perspective, its impact should be felt by UK institutions this year, according to those interviewed. While many believe U.S. banks will lose market share in 2022, more believe they will. The outlook is less positive for Italian banks and to some extent Swiss companies – perhaps Credit Suisse’s issues with Archegos, Greensill and this year’s spy scandal have swayed people’s opinions. In the meantime, the outlook is more positive for French / Benelux, German and Canadian banks.

Debt capital markets are of course a big church, with many different subsets – public sector, financial institutions, corporations, emerging markets, securitization. But which ones will prosper in 2022? In our first question – What is your prediction for volumes in major EMEA bond markets – most respondents believed next year’s volumes would be flat or lower. But when we asked people to predict how each subset will perform, they were more optimistic. ESG bonds should be active, as should FIG and IG corporate bonds and SSAs. According to DCM bankers, who may fear for the industry due to inflation and rising interest rates, high-yield bonds will have a harder time, however. For revenues, rather than volumes, FIG and companies generate the most optimism.

With broad optimism about volumes broken down by industry, overall there is a strong consensus that capital markets houses will make more money. Dishes or up to 5% more were the most popular responses, although a few hard-hitting bankers believe their businesses will earn up to 20% more. If they do, one wonders if their compensation will increase by a similar amount … It rarely works that way.

One way to try and get more profit from the capital markets is to embrace technology, replacing repetitive manual tasks with blockchains or the like. 2021 has seen a proliferation of such platforms, often featuring old market faces. We asked DCM bankers what disciplines or functions are defined for the most exciting technological developments, with half expecting them to deny advancements in technology and stress that DCM is a “people company.” Instead, our respondents chose union and commerce as likely to have the most exciting technological future. Even origination should feel the silent embrace of technology. DCMers may be more ready after nearly two years of doing remote roadshows and pitch meetings from the garden shed via Zoom.

Governments and central banks have come to the rescue of the markets on several occasions since the financial crisis of 2007-2008, making their roles and policies more critical than at any time in the history of Euromarkets. What central banks will do next year with interest rates and their quantitative easing programs has been the big question for the past six months, at least until Omicron crashed at the scene. Inflation is back, although there remains the question of what sort it is – transitory or structural. At 6.2% in November, it’s hard not to think that US inflation is anything but structural, and that was the conclusion of the Federal Reserve at its December 15 meeting. Under normal circumstances, high interest rates would be applied quickly. But of course, the arrival of Omicron means the world is anything but normal and makes the outlook for next year even more murky and uncertain. But here’s what DCM bankers thought the Fed and European Central Bank would do next year, before the new variant arrived.

One of the fascinating questions of the year was how market participants would respond to easing lockdowns and attempt to revert to the pre-pandemic ways of doing business. Once the summer vacation was over, it seemed like people were getting back to normal quickly – faster than expected. Business travel is back for good (after an 18-month ban, the thought of having to be at the airport before dawn seemed almost exotic and glamorous). Offices were fuller than at any time since March 2020 and in-person events like IMN’s Global ABS conference have resumed. Most of those polled thought it would continue next year, but had not heard of Omicron when they took the survey. The answers to the frightening prophecy d) We will go in and out of blockages due to new variants and high infection levels in question 21 would have been very different if it had been given a month later.

And finally, good news… expectations are that the supply of green, social and sustainable bonds will continue on its almost supersonic trajectory until 2022. There are still many borrowers from all sectors who have not yet joined the club. GSS, but they will feel more and more compelled to do so, whether under peer pressure, pressure from investors, to obtain cheaper financing or because it symbolizes a real commitment to the environment or the company. At the same time, the choice of formats is widening. The volume of sustainability bonds has increased sharply this year, with more and more borrowers feeling more and more comfortable in tying the cost of their funding to the achievement of future ESG objectives. One of the attractive qualities of SLBs is that borrowers who might find it difficult to issue green or social bonds for product use (either because they don’t have enough suitable assets or because they are operating in sectors very polluting, for example) can issue instead of SLBs and thus align their funding with their contribution to the great and necessary transition to a low carbon economy.

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