In many ways, 2015 didn’t seem as if there was much of a correction going on. US investment-grade bond issuance steamed to yet another annual record – breaking the mark in October this time, as opposed to November in 2014 and December the year before that. The Fed’s first rates hike was supposed to come early in the year, then the spring, then the summer. But it didn’t – and new offerings just kept piling into the primary market.
Yet, as the leaves began to fall from the trees in autumn, the wheels started to come off the wagon. The absence of a rates hike turned into volatility concerns surrounding when the hike would come. A strong dollar put pressure on emerging markets. Would-be president Hillary Clinton said drug companies were making too much money, and the healthcare sector promptly tanked. Depressed oil prices made a mockery of debt-laden E&P companies’ revenue projections. The IPO market quite simply stalled.
By the time you read these words, the Fed will (probably) finally have made its move. Even if it hasn’t, though, the market itself – or at least the minds of those in the market – has moved on. If not a market correction, call it a mentality correction. Everyone was still gung-ho and risk-on in the first half of 2015. As the year draws to a close, sentiment is very different.
As always, there are plenty of possible sources for worry. Terrorism, Chinese growth, the apparent tug of war between the central banks of the US and Europe – all of these (and more) will only add to the difficult work of keeping the machine of trillions of dollars of bonds neatly humming along.
And the change in mentality surely means that buyside and sellside alike will be taking a much more considered look at the products brought to market in the year ahead. Collateral quality and ratings will matter more. A particular credit’s story will be, well, more than just a story. Risk assessment – not always a top priority when times are booming – will have renewed importance.
All of this means that those who do the hard work – and do it properly – will still have loads of opportunities in front of them. The award winners honoured here all did that in 2015. When times were tough, their professional diligence and market intelligence were tougher. Risk is always there. This year’s winners showed that, with the right approach, reward is too. Please join us in congratulating all the winners of the 2015 IFR Awards.
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