Markets

Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

Asian bond bankers are going the way of the South China tiger. Not only was 2015 a pretty lean 12 months, but this year is shaping up as more of the same. After record note sales in 2014, companies in the region are moving back to bank loans, and starting to deleverage.

The Great Deleveraging Begins
Bond and loan volumes dropped in Asia excluding Japan last year while equity offerings increased
Source: Bloomberg

Banks have gotten the message and have begun to cull fixed-income staff as well as merge bond and loan desks to make better use of those people who haven't been shown the door. On Friday, Bloomberg News reported that Goldman Sachs plans to eliminate more than 5 percent of traders and salespeople in its fixed-income business, while on Thursday, UBS said it was merging its Asian debt-capital markets and leveraged-finance units. The moves follow a similar reshuffle by Standard Chartered in 2015, and Deutsche Bank and Barclays earlier this year.

Outside of a change in companies' borrowing habits, software engineers are also in part to blame for bond bankers' demise. The rise of fintech, or financial technology, companies has automated processes, replacing humans with computers.

Then there's money, or the fees bankers get from helping a company to organize a bond sale. Not only are there fewer deals, but they're paying less.

Low Paying Job
The percentage companies pay bankers to help them sell bonds has been dropping
Source: Bloomberg
* Data comprises only fees that are disclosed.

Markets also are turning against bond bankers. Chinese companies, by far the biggest clients for fixed-income origination desks, are finding better deals at home, where they, naturally, prefer to recruit local banks. And as the yields and spreads on Asian dollar corporate bonds increase amid concerns about China's future, companies are reverting to loans, which are cheaper and involve less public scrutiny. That's especially true for junk-rated companies, which also happen to be the biggest fee payers.

Costly Endeavors
For high-yield issuers, the biggest fee payers, the cost of selling bonds has risen almost 50 percent
Sources: Bloomberg; Bank of America Merrill Lynch

Of course, it's not a complete famine, so bond bankers are unlikely to become entirely extinct. Some $35 billion of U.S. currency notes mature in Asia this year and a record $85 billion of debentures come due in 2017, according to data compiled by Bloomberg. While much of that will probably be replaced by local debt, loans or equity, some will still be refinanced in the bond market.

The overall trend, however, is clear. In Asia, bonds are no longer a growing business. As the market evolves, so too must its bankers. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Christopher Langner in Singapore at clangner@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net