Fixed-income markets stand at a crossroads. The traditional model is broken. A new breed of debt advisory and trading boutiques believe they hold the key to the future. Some of the biggest names in the bond market are jumping on the bandwagon. Alex Chambers examines whether this is the day of the independents.

With the business models of many of the largest financial firms destroyed by rapid deleveraging, it suddenly looks smart to be a purveyor of independent advice. The biggest, Lazard, finds corporations, governments and other banks desperate for help in repairing their balance sheets. Peter Lee reports.

Last month executives of the world’s largest banks, alarmed at collapsing share prices, told everyone what a profitable start to 2009 they had enjoyed. By the end of the month, shares were rallying. Let’s hope that actual first-quarter 2009 earnings announcements don’t pour cold water on their hopes. Peter Lee reports.

Germany’s commitment to the EU project will guarantee bailouts for weaker eurozone members. But it’s a different story for hard-pressed central and eastern European states and their banks.

Good timing means telecoms transaction greeted with enthusiasm.

The exploitation of natural gas resources looks set to transform Papua New Guinea’s wealth profile and social structure. The downside is the possibility that its undeveloped infrastructure and institutions will be unable to cope with rapid change. Chris Wright reports.

As the Philippines faces the Legacy scandal, president Gloria Macapagal-Arroyo is trying to reassure the world that her country is better placed to withstand the global crisis, after the lessons of 1997. She talks to Lawrence White about Asian regional cooperation, trying to beat corruption and why she’s letting Legacy fail.

Saudi’s PIF to flex its financial muscle

Research from fund of hedge funds Infiniti Capital says managers that have been running their funds for less than three years are outperforming older and larger managers. Infiniti’s emerging manager products lost 12% in 2008 compared with about 18% for average hedge funds. One reason, suggests Infiniti, is that larger well-established hedge funds have stickier clients, who are less hasty in their redemptions. As such, managers would have been later in recognizing the panic selling by investors.

Driven by rising oil revenues and booming economies, the number of private equity funds setting up in the Middle East and North Africa boomed until the beginning of the economic crisis. Some 100 funds focused on the region have raised $19.5 billion in capital there. However, now that stock markets have crashed, funds are finding it hard to deploy capital. "The sellers have dried up," says Fadi Arbid, executive vice-president and country head of Saudi Arabia at Amwal AlKhaleej, a MENA-focused private equity house. "Six months ago, companies were looking to sell stakes to private equity firms. Then stock markets crashed – the Saudi market has lost 60% since last August – and private equity funds have had to say to those prospective companies that the prices on the table before are no longer valid." The result has been that sellers have walked away or delayed that process. "It’s very difficult for these companies that are turning a profit and even growing, have great fundamentals, are in a steady environment, but which have seen the market caps of their public comparables wiped. To suddenly hear that they are worth perhaps 60% less today when they are more profitable is difficult to take, and unsurprisingly, they are turning away from selling."

New global currency looks remote prospect

Sanford Bernstein analyst Bradley Hintz says that as hedge funds change the way they do business with prime brokers, the top players will change. Hedge funds will no longer accept big counterparty exposure, he argues. He predicts that the top three prime brokers in 2012 will be JPMorgan, followed by Goldman Sachs and then UBS.

An analyst report from Morgan Stanley predicts a further 15% to 30% redemption in hedge fund assets over 2009. About 20% of assets have already been redeemed. If the predictions are correct, the hedge fund industry will have shrunk to $950 billion by the end of the year from an estimated high of $2 trillion.

In an exclusive interview with Euromoney Zhu Min, group executive vice president at Bank of China, talks about lessons learned from the financial crisis, the limitations of Basle II, and reforming the bank’s risk management.

Maturity of bond market will be tested as issuance builds.

At this month’s G20 summit, international regulation of financial services firms is certain to be the dominant debate. However, there are growing doubts that more rules will benefit the hedge fund industry.

The Universities Superannuation Scheme, with more than £23 billion in assets, is increasing its allocation to alternatives from 10% to 20% over the medium term. At present the fund’s alternatives portfolio primarily makes private equity and infrastructure investments but hedge funds will be a focus of the increased allocation. Emil Porter of Key Asset Management has been hired to head the initiative. Mike Powell, who heads alternative assets at USS, says there are more hires to come.

The euro benefits from being the anti-dollar.

Those that avoided Madoff madness surely offer a wiser approach to investment than some investors’ rash direct investments. Neil Wilson reports.

Frederic Boillereau has assumed the responsibilities of Andrew Brown, who had been global head of FX at HSBC. Brown’s departure follows three record years for the bank’s FX business and is for personal reasons. Under Boillereau, who has been at HSBC since 1998, HSBC has finally got around to integrating its FX spot, forward and options businesses. Boillereau also remains in charge of HSBC’s metals activities.

Radical shift in Swiss National Bank’s monetary policy sparked talk that other central banks would join it in competitive devaluation race.

Just days after the UK Debt Management Office stated that it would use syndication on a quarterly basis to distribute bonds, a 40-year gilt auction failed. Only £1.627 billion of bids were attracted to the £1.75 billion sale of the 2049 bond. The failure was attributed to a sudden turnaround in investor sentiment for gilts and a function of the distortion caused by the Bank of England’s quantitative easing. The last failed auction took place in 2002.

Global DCM volumes reached $1.26 trillion in the first half of this year but this 2% increase in volumes comes from a 55% drop in deal activity according to recent figures from Dealogic. Corporate investment grade volumes reached a record of $802 billion for the period – more than double last year’s figure, and senior government guaranteed debt was up 38% to $291.6 billion. Structured finance is a shadow of its former self at just $39.7 billion.

The combination of network and trading infrastructure issues that resulted in Icap’s EBS platform crashing twice in early March inevitably got tongues wagging. Icap responded quickly and took EBS down mid-week for maintenance. Its decision looks well founded. Just a week later, a record level of activity took place in dollar/Swiss franc trading following the Swiss National Bank’s dramatic change in its monetary policy. And as Icap was also swift to point out, far from being "creaky", EBS has chugged along without any trading interruptions since August 2005.

The final take-up of HSBC’s fully underwritten rights issue to raise £12.5 billion ($17.7 billion) is due to be announced on April 8. It would be interesting to know what the take-up was like among HSBC’s own employees.

Yet more methodology-tweaking by Moody’s and Standard & Poor’s last month brought the prospect of downgrades to the triple-A tranches of cash CLOs ever closer to reality. Moody’s actions early in the month resulted in nearly 3,600 tranches rated double-A and below of 760 US and European CLOs now facing downgrades. S&P’s new approach envisages a 1.6 notch downgrade for senior triple-As, a 4.3 notch downgrade for junior triple-As and a 5.8 notch downgrade for triple-Bs.

Lehman Brothers and the failed Icelandic banks leave their mark.

Banks create core tier 1 capital via buyback operations.

Despite negative returns in 2008, hedge funds should bottom out this year and look attractive to many investors compared with other asset classes. Neil Wilson reports on the latest data.

Mexico’s transport and communications ministry, the SCT, is expecting soon to relaunch its second federal highway re-concessions programme, Paquete del Pacífico, known as Farac II.