"The power to say yes"

In the early 1990s, a famous French bank transformed this slogan into an aggressive development strategy. Its will to lend to anyone and everyone led the venerable establishment to the brink of bankruptcy a few years later in view of the recession, the downturn in the property market and clearly risky investments in cinema and industry.

Today the situation has changed considerably and the banking sector could be reproached for not financing the economy enough. This time round, it is not the will that is missing, but rather the impact of strengthened prudential standards, which are massively reducing the ability of banks to supply credit.

The larger companies have therefore logically turned to bond markets to ensure their financing. This has proved successful for subscribers and DANONE for example, recently managed to raise €500m over five years at a rate of barely more than 1%, while BASF has easily borrowed €1bn at 2% over 10 years. Buyers of these bonds are bond funds (such as Echiquier Oblig), private bankers and even individuals who prefer to lend their savings to attractive issuers rather than see them sleep on money markets.

The irony of the story is that the various reforms implemented in capital markets had gradually excluded these individual investors from bond markets.

Over the past 30 years, in order to face the explosion in their deficits, state powers have clearly favoured the development of life insurance, with an outstanding fiscal framework that drove the majority of savings into government bonds. Apart from this attractive taxation, the specific valuation method for life insurance (primarily in terms of accrued interest and not instantaneous market value) above all created a magnetic attraction to a product that “never lost value” in a trend that ridded end investors of all desire to own corporate bonds directly.

The balance has now shifted again, just as doubt is setting into the minds of savers in terms of the solidity of banks and the ability of states to pay off their debts. As such, the markets that have been so denounced since the financial crisis now have an essential role to play again, namely to match lenders and borrowers.

Companies that are still trying to finance their investments and growth as well as diversify their financing sources have clearly understood this and firms of all sizes are now benefiting from this recovery in the bond market: BOLLORE, RALLYE and PLASTIC OMNIUM have just found credit directly from investors who now prefer a transparent corporate balance sheet or an industrial business to the fairly opaque nature of state or bank accounts.

The corporate bond market is in the throes of change in France and Europe. As bank balance sheets are deflating, this market is gradually catching up its lag with the US bond market which finances more than two-thirds of corporate requirements.

The choice of bonds to invest in is widening to the great satisfaction of investors in companies who are recovering “the power to say yes” to the financing of better projects. What excellent news!

avec la complicité d’Olivier de BERRANGER