BEWARE OF THE BEAR
It had to come. The Eurobond market had been living on Easy Street for four years. For the last 18 months it had been in a state of euphoria. The steady slide in interest rates meant that for most players it was difficult to lose money. Whether a bond was mispriced, an issuing house lacked placing power or its dealers proved incapable of staying in tune with the market, just hanging on to paper usually produced healthy profits.
For the young traders, many of whom were recruited into the booming market straight from college, the experience has been dreamlike. But as they climb into their Porsches and BMWs at the end of the day, many are beginning to get a nagging feeling that their luck may have just run out.
After a first quarter which presented some Euro-houses with greater profits than for the whole of 1985 - itself a record-breaking year - May produced a nasty shock. The market turned sour. In one month some traders managed to wipe out all the profits they had made in the first quarter. The rise in interest rates continued through June.