Investment banking, after five long, hard years of negative or anemic growth, job cuts, pay cuts and public lashings, is on the verge of a comeback. Really, it is—if the data can be believed.


Investment Banking Activity Amid Rise in Volatility

Most analysts agree that the current uncertainty will be with us for a very long time. 2012 was a turbulent year and 2013 looks set to continue in a similar vein. Governments are undertaking a substantial degree of fiscal consolidation and the euro crisis is placing a great deal of uncertainty around global economic prospects. Unfortunately there is no shortcut in responding to the ever-increasing wave of changes and new regulation; this game is set to run and run. Let’s take a closer look at investment banking activity amid rise in market volatility.

Weekly, Monthly, Quaterly, Annual Progression Chart

M&A, ECM, DCM: Activity Declines across the Board

Issuance activity slowed down last week, with both equity and debt  issuance declining by 27 percent and 43 percent worldwide respectively. Total ECM issuance was $12.4bn, with Follow-ones down 41 percent and IPOs down 57 percent vs. the prior week. Converts were up 93 percent w/w and remain relatively strong this month. IPO markets cooled following an extremely robust May, with $5.2bn of new public offerings June to date, down 52 percent vs. May. Debt markets were particularly slow last week with total issuance falling to $50.5bn. High Yield was down 41 percent w/w and Investment Grade was down 57 percent w/w. M&A announcements were up a modest 1.6 percent last week to $43bn, but remain sluggish this quarter, down 1.7 percent q/q to $498.4bn. M&A completed deals declined 90 percent w/w after a number of sizable deals closed last week.

Investment Banking: Volumes Slow Across Asset Classes; CME Bucks the Trend

U.S. equity and options volumes remain sluggish. U.S. equity volumes are down 14 percent w/w and are flat this quarter, whereas U.S. options volumes are down 12 percent w/w and up a modest 2.7 percent q/q. At ICE, Brent futures volumes were down by 7.6 percent w/w and are up 2 percent q/q. Within credit, HY and IG Bond ADV also fell by 17-19 percent w/w. CME Group Inc (NASDAQ:CME)’s core products continue to counter the trend. Here, Interest Rates and Equity Index futures ADV advanced last week by 8.4 percent and 5.3 percent w/w. FX futures also spiked by about 10 percent w/w. QTD, rates and equity futures ADV have clearly been very robust, up 13 percent q/q.

Investment Banking: Markets and Rates

Markets were sluggish last week, with both S&P 500 (INDEXSP:.INX) and MSI World slipping by about 1 percent w/w. The 10 Year treasury yields declined modestly by 4bps w/w. 2-Year treasury yield also declined by 3 bps w/w while 3M-LIBOR dropped marginally to 27 bps. Corporate credit spreads widened, up 8-17 bps across product categories. Volatility expectedly picked up last  week, with the VOLATILITY S&P 500 (INDEXCBOE:VIX) increasing to 17.2, up by 13 percent w/w.

According to all the above, statistics show softer investment banking activity amid a rise in market volatility.