Spoilt for choice
Debt markets have been diversified since the global financial crisis first hit, and many borrowers have faced a bewildering array of cheap debt options. But with financial markets increasingly nervous, do companies need to get shopping while liquidity remains?
Two years ago Brent Crude was trading at more than $105 (£72) a barrel, and had been for some time. Oversupply and falling demand precipitated a largely unanticipated collapse, and earlier this year oil traded below $30 a barrel.
Consumers might like low oil prices: Deloitte’s latest Consumer Confidence Survey (Q4 2015) shows consumer optimism at its highest for four years. But energy companies, revenue-hungry governments and financial markets are spooked. After opening the year at 6,093, the FTSE 100 share index fell to 5,673 on 20 January this year, dipping further below the 5,600 mark in February before making a modest recovery.
Rolling programmes of quantitative easing have kept asset prices high. In the US, the Federal Reserve bought more than $3.7trn of bonds – equivalent to 2.9% of gross world product. The Bank of England fuelled the UK system with almost $550bn of asset purchases.
The US and the UK have wound down their programmes (though they haven’t unwound them). But, in January the European Central Bank announced that its €60bn-a-month (£46bn) asset purchases, which had been going on for a year, would run until at least September 2016.
Tug of war
Equity markets are usually the first to react to any crisis. Demand for some large new issues has remained – albeit nervous demand. James Roe, equity capital markets partner at legal firm Allen & Overy, says:
“Notwithstanding [the backdrop], a number of issuers have been successful in coming to market, including Clydesdale Bank, CMC Markets and Ascential. The pre-summer pipeline is, however, thin and a number of deals will likely have been pushed back to after the summer following the announcement of the June referendum.”
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