SECTION TITLE FOREWORD
Another test of functioning markets By Jean-Marc Mercier
As I write this quarter’s Foreword, all my thoughts go to the victims of the COVID-19 and to their grieving families. This plague has hit individuals, but it is also a truly global trauma. I cannot help but hope that this common suffering will help us connect for the better, behind our human differences. COVID-19 has been a test in more than one way, and while it is too early to conclude where we will end – in terms of its lasting impact on economies, corporate and institutional balance sheets or simply how we go about our life on our planet – the two things that have stood out for me are our individual and collective resilience at large and the quick adoption and integration of technology and how successful working from home has proven to be. We have seen extraordinary global central bank coordination to support the economies during the current unprecedented times, enabling the efficient functioning of the capital markets and keeping liquidity available. Hopefully, this will lay the foundation for a potentially strong recovery, once we exit the worst of the pandemic. I must acknowledge here that ICMA has played a key role in advocating for and keeping the capital markets functioning during what has been one of the toughest crises given its far-reaching impact. It goes without saying that an open market is key and is a critical gauge in today’s time, without which a lot of the actions taken on the monetary and fiscal front would not have been able to trickle down more widely. The orderly functioning of the markets is a testimony to further building the trust and transparency in the markets today and most importantly enabling sovereigns, corporates and financial institutions to efficiently raise capital. Sustainable and responsible financing have also found a greater appeal during this period and have been well received.
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It is not an accident that, despite the widespread disruption on a global scale, we have witnessed what has been one of the busiest times in the capital markets. For example, as of end May the issuance volume of international bonds was up 44% globally versus 2019 and the US investment grade markets were up a massive 90%, crossing the psychological US$1 trillion level, well ahead of prior years. In the SSA space (excluding emerging markets), volumes were up 40% plus. Elsewhere, the sub-investment grade markets have continued to find appeal, with May being the biggest month in the US. One may say that the markets currently are not reflective of the risks that may lie ahead of us and asset prices are inflated – the jury is out on that. But to me, what is key is that capital markets are playing the vital role of enabling issuers to fund their requirements, be it for new funding, refinancing or even liability management exercises. Alongside sovereigns supporting the economic agenda, ICMA has played an important role to make this all possible. What is also encouraging to me is that I probably have seen more records being broken in recent weeks and months than in the past three decades of my career. I hope we all emerge stronger out of this pandemic, supported by markets that allow for all that ICMA strives for. Stay safe and take care.
Jean-Marc Mercier is Managing Director, Vice Chairman, Global Banking, HSBC, and Deputy Chair, ICMA.
