Investment banks are eyeing up a bumper year of deal-making as activity in the money markets is set to hit its highest level in a decade.
The volumes of cash flowing through investment houses in the shape of debt and capital market (DCM) activity hit $5.2 trillion (£4.1 trillion) in the first nine months of the year, according to stats compiled by Dealogic. And it is on course to top the record high of $6.6 trillion set back in 2006, the researchers predicted.
The numbers account for the total amount of money that has been raised by companies issuing new debt or equity since the start of the year. The strong activity has been boosted by record-low borrowing costs for corporates around the world, off the back of an extension of ultra-loose monetary policy by central banks.
The European Central Bank (ECB) added corporate bonds to its €80 billion a month quantitative easing programme earlier this year and the Bank of England also announced an 18-month £10bn spending spree which will see it snap up high-quality corporate debt. Both measures pushed bond yields for the world’s top companies to even lower levels, and many companies have taken advantage of the unprecedented interest rates to stock up.
August, usually a quiet month on the financial markets, recorded its strongest ever month of DCM activity, buoyed by a $20bn bond issuance in the US by Microsoft - its biggest ever.
In September, pharmaceutical giant Shire took advantage of the low yields to issue $12bn of debt in London in the biggest deal in the UK this year.
For investment banks the jump in activity is a welcome boost to their bottom lines amid challenging global conditions. Multi-billion dollar fines and lawsuits from the financial crisis show no sign of abating and the low interest rate environment has squeezed operating profits.
American giants JP Morgan were the biggest dealmakers of the year. The bank booked more than $1.1bn in fees on debt and share offers worth $351bn. Rivals Bank of America Merrill Lynch (BAML) will be looking to close the gap in the final quarter, however, with just $40m down on takings from $305bn of deals.
Barclays was the UK’s top representative on the world stage, collecting $780m on $274bn, while HSBC topped the charts for activity in Europe.
In the UK, Dealogic found there had been a six per cent slowdown in the first six months of the year as a result of pre-referendum hesitancy. However, the Bank of England's swift action to encourage companies to look at London for their DCM needs helped secure a 15 per cent jump in volumes between July and September compared to last year.