In the first half of 2004, as bond investors worried about rising interest rates and borrowers congratulated themselves on pre-funding at low absolute rates and spreads in 2003, global debt capital markets volumes fell 11% from first-half 2003 levels. Banks? revenues from the business fell by 10% to $8 billion from $8.9 billion, according to Dealogic.
And this might just be the start.
Of course, banks knew this wretched day would come. But they have hoped all along that revenue from reviving equity capital markets and M&A business would meet the shortfall when the debt bonanza ended.
Will it?
The good news is that first-half global ECM volume and revenue were up nearly 60% on the same period last year, according to Dealogic. But remember that the first half of last year was particularly bad and this does not tell us much about what we can expect in the second half of 2004.
The more worrying news is that global ECM volume and revenues have suffered their second successive quarter-on-quarter decline. Second-quarter ECM volume this year is 30% less than it was in the fourth quarter of 2003, when it reached $162 billion, and when secondary markets were rising.