1987 - Year of the shrinking market?
Bernt Ljunggren, deputy managing director at Swedish Export Credit (SEK), is used to almost hourly contact with investment bankers soliciting business. In 1986 SEK raised around $2 billion in the international capital markets, excluding refinancing. The total for 1987 will be more or less the same, and Ljunggren expects to be assessing a good number of new ideas.
"We're coming into an environment where more options and swaps will be used, and with the liberalisation of the markets, there are more American banks setting up capital markets operations.' Bull and bear bonds (indexed to stock markets) and heaven and hell bonds (indexed to currency markets) are two of this years's innovations that Ljunggren believes will stay the course next year.
The SEK working formula is to raise floating rate dollar funding at around 100 basis points below Libor. This means an extensive use of swaps. "The markets get more sophisticated and more mathematical, but we're not keen on anything that doesn't work in the primary market. All our deals this year worked, even the 40-year-bond issue. Even if we throw away 95% of the proposals we get, what we end up with should be tough--but not too tough--on the price.'