Emerging market sovereigns that issue heavily in debt markets should prepare for higher borrowing costs.

If anything symbolizes how far emerging markets have come over the past five years, it’s the growth of their domestic capital markets. Few would dispute that emerging markets local-currency debt is now an established asset class, despite its relative youth. Local-currency debt is the way of the future, but further reforms are necessary.

In 2005, the Nikkei equity index shot ahead by 40% while 10-year Japanese government bond yields inched higher by just 15bp.

Rumours of electronic broker EBS’s imminent takeover are rife, but a £1 billion price tag seems wide of the mark. Getting these to agree on whether tea or coffee is served at board meetings is probably difficult. Getting consensus on whether or not to sell EBS’s business, and then who to sell it to, must be a near impossibility.

With hedge funds collapsing at record rates, funds of hedge funds will need to reassess their strategies. If you can’t beat them, join them.

High oil prices pushed Latin America’s equity markets to dangerous levels. In a new era where emotions about oil scarcity run high, Latin America is perceived as a big, endless supply of commodity wealth. But keep an eye on the volatility.

The country’s stock indices are rising as the prospect of a coherent market looms into view.

It might make sense for hedge funds to buy traditional asset managers. When Citigroup sold off its asset management arm to Legg Mason last year, leaving the focus on its separate alternatives business, it supported the belief of many in the market that traditional asset management was becoming something of a dinosaur.

Exchange looking to build on the success of its established dollar index.

Funding from Abbott Laboratories for Boston Scientific’s bid for Guidant could set an important precedent.

UK

Asia Debt Management, a successful distressed debt fund manager based in Hong Kong, has teamed up with the Asian Development Bank to launch a $338 million closed-end fund targeting financially distressed companies that need rehabilitation. This is the second Maculus fund: the ADB also invested in Maculus I and this time has committed $45 million to the Maculus Fund II. The new fund will invest primarily in the capital structure (securities, loans, equity or other assets) of potentially viable, listed or unlisted companies, in financial distress due to excessive debt or unsustainable capital structures. The fund has a five-year life but might be extended for up to two consecutive one-year periods at Asia Debt Management’s option.

CNOOC finally closed a significant Nigerian oil deal in January.

Japanese companies are now creditworthy and the banks are recapitalized but neither side seems keen to enter into loan transactions. But companies can see the long-term value of establishing access to capital markets. And lenders are keen to repackage and redistribute credit risk in new ways and define a new relationship with corporate customers. Peter Lee reports

René Karsenti has left the European Investment Bank, where he was director-general for just under 10 years, to become the CEO of the International Capital Markets Association, the product of the recently merged International Primary Markets Association and International Securities Market Association.

US carrier United Airlines has pledged the rights to some of its most valuable routes as collateral for a new loan that it hopes will take it out of Chapter 11 bankruptcy protection. As well as route rights between the US and London Heathrow and Japan, China, Hong Kong and Japan, it is also pledging $2.6 billion in aircraft and spare parts in a desperate bid to find collateral for the six-year $3 billion syndicated loan. United needs the new cash to pay off its debtor-in-possession financing. The company filed for bankruptcy in December 2002.

Vanilla deals fell out of favour in equity-linked issuance in 2005, with highly complex, structured transactions building unprecedented dominance. Despite higher volatility levels than in 2005 and a very promising M&A outlook, this trend is likely to continue in 2006. Peter Koh reports.

The borrower makes disappointing start to wave of telco financing.

As gold has traded up to 25-year highs, the Canadian dollar has weakened, despite the products’ strong long-term correlation. Does this mean that the relationship has broken down?

First-of-a-kind deal exploits strong interest in regional IPOs.

Those banks distributing goodies in the hope of influencing the poll (against the rules, we hasten to add) might do well to remember that clients are often an ungrateful bunch. Apparently, one Japanese client of a UK clearing bank complained about the iPod Shuffles it received for Christmas. It was not the fact that iPods are made by one of its competitors that caused the problem. No, it was the fact that the Shuffle is at the bottom of the iPod range.

It seems that some banks will pull out all the stops to feature prominently in Euromoney’s influential FX poll. Word filters through of gifts being sent out and clients being lavished with entertainment. The managing director of one prominent bank was so eager to start the lobbying process that he emailed Euromoney asking: “Fri 5pm: should I unleash hell? Is the site ready? Let the games commence...” Just exactly which games he was about to unleash in hell is unclear, but one of his disgruntled clients has complained of being hassled, almost non-stop, to vote. “I told all the banks I’d fill it [the poll] in when I was ready, not before,” he moaned.

Iraq has completed a ground-breaking debt exchange that will involve Iraqi risk being actively traded for the first time in emerging market indices. It's a $2.7 billion Eurobond to join emerging market indices, boosting liquidity.

Japan’s corporate sector has spent the past few years selling businesses off to pay down debts and restructure but there is gathering evidence of the emergence of a more acquisitive bent.

Building company Waco International has been sold to a private equity consortium for R5.4 billion, the largest ever such deal in South Africa.

The country’s president-elect knows little of economics, but is set to appoint a market-friendly finance minister.

Moody’s says that it intends to keep GMAC’s senior unsecured Ba1 rating under review for the time being, breaking its rule of resolving ratings within three months of announcing a review.

Just a few years ago, mezzanine finance was very much an alien concept in central Europe. That changed in 2003 with the arrival of the region’s first dedicated mezzanine fund. Today, mezzanine provision is booming, and its proponents hope it can play a significant part in the leveraged buyout boom predicted for the region. Kathryn Wells reports.

Year-long talks to create leading investment bank in Brazil break down.

Euromoney’s annual poll of polls shows that universal banks still dominate overall because of the breadth of their business. But firms such as Barclays Capital, Merrill Lynch and Société Générale are scoring notable successes in their chosen areas. Clive Horwood spoke to their heads of investment banking.