
US Companies Overpaying for Bonds; Banks May Be to Blame – Reuters
March 31, 2016 \
12 Comments
Full Article: Reuters
“When banks advise corporate clients, the bonds are systemically underpriced,” said Alberto Thomas, a former fixed income derivatives banker at UBS and now a partner at Fideres. “But when they do their own bonds, they seem to know exactly where to price them.”
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12 Comments on "US Companies Overpaying for Bonds; Banks May Be to Blame – Reuters"
I’d also add it would be interesting to see the definition of the post-issuance secondary price. Is it a screen secondary bid mirage valiation in 250K or is it actually where 5MM to 10MM blocks trades? While it affects both financial and corporate issuers equally the reality of the post-issuance rally is likely muted further by the reality of the secondary markets.
100% agree with you that you can not eliminate the post-issuance rally. People like shiny new things in this market. My point is not that the article focuses on the wrong issue in the market. It is not the pop, it is who gets the bonds. That is a problem for several reasons
I traded off-the-run secondary markets and judging the spread premium for the illiquid was a definite skill, all while in competition. I wasn’t getting paid by anyone so not only do I rarely sympathize with banks but even rarer do I sympathize with syndicate desks! The non-frequent borrowers in primary are a direct analogy for my own experiences.
Cougar, I would agree with you if this were an actual underwriting process like in the old days where if you priced the deal wrong…. But for a long time now pretty much all deals are negotiated. Syndicate desks are order takers just trying to keep as many people (think largest buy side clients as per Mustang) happy as possible so they can still print risk-free money.
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