On the path of the bond market: is there a bear, a bull…or what else at the end of the road?


Way too many reports are warning the financial community on the volatility and, possibly, decline of the bond market. Goldman Sachs recently warned investors on the risks of long-term positions, while Bill Gross, who manages the $1.5 billion Janus Global Unconstrained Bond Fund, a couple of weeks ago effectively noted how “credit based oxygen is running out”.

However not everybody agrees with such a pessimistic vision, since Gareth Isaac, Fund Manager at Schroders, has recently explained how  “… it is important to highlight that we do not believe this is the start of a sustained fixed income bear market. Interest rates in the US are still effectively zero and are negative in Europe. Until there are changes to these policy rates, we believe cash is not an alternative for investors. Bonds, even with low yields, appear comparatively alluring”.

Basically, the common opinion is that the EU’s quantitative easing policy has forced investors to shift their allocations towards 10, 20 and even 30 years positions in order to desperately grasp a slice of an income, whereas fundamentals remain solid.

As far as the performance of the legal market is concerned, it shall be noted that the vast majority of the deals involved the issuance of corporate bonds and debt instruments with sovereign bonds and public finance in general representing a minimal fraction of all issuances.

Since January 1st, 2015, in the US two law firms are leading the market with impressive performances both in the number of deals and aggregate value. Davis Polk & Wardell and Simpson Tacher & Bartlett are dominating in debt capital markets thanks to deals such as Morgan Stanley’s $1 Billion Senior Notes offering and AbbVie’s offering of $16.7 Billion Senior Notes for Davis Polk, or Apple’s $8 Billion Bond offering and CNOOC’s $3.8 Billion SEC-Registered Guaranteed Notes offering for Simpson Tacher.

Following the two leaders is Cravath Swaine & Moore that has been involved in the Royal Dutch Shell’s quintuple-tranche of US$10 billion bond offering and in Fiat Chrysler’s $3 Billion High-Yield Senior Debt offering.

Back in Europe, Slaughter and May and Shearman & Sterling currently occupy the first and second positions in debt capital markets. Slaughter has been involved in Aviva’s update of its £5 billion Euro Note Programme and in BHP Billiton Finance’s issue of EUR 2 billion notes under Guaranteed EMTN Program, while Shearman acted in Anglo American’s $1.5 Billion Notes Offering and in HSBC Holdings’ $2.45 Billion Contingent Convertible Securities Offering.


Author: Ambrogio Visconti