Wall Street Has a Bond Sale Problem
The allocation of new issues needs to be done better. Given the rampant demand, genuine buyers often feel cut out of the process.
Can’t buy in?
Photo: Bloomberg
Marrying the interests of issuers of new debt with yield-starved investors desperate for access to bond sales is an increasing problem for investment banks. This is a lucrative and high-profile part of bank business that needs to work better because the current feeding frenzy is distorting markets.
According to the Wall Street Journal, several European countries are capping some of the frothiest hedge fund orders of sovereign debt. This is understandable as issuers like to sell to investors who’ll hold their bonds for a longer period, and the current free-for-all makes it hard to tell the keepers from the hit-and-run crowd. Given the rampant demand for high-quality debt, genuine buyers often feel cut out of the process.