17 April 2024

ICMA Quarterly Report Second Quarter 2024

Topics: Lessons from LIBOR transition in the bond market under English law; Transition finance in the debt capital market; Liquidity and resilience in the core European sovereign bond markets; Bond markets to meet EU investment challenges; Sovereign debt proposals well intended but flawed

The first quarter has set a very positive tone for debt markets
in 2024 with extremely robust new issuance activity and strong
underlying conditions in secondary markets reflected in tightening
risk asset spreads across almost all asset classes. Our work at
ICMA has closely mirrored this frenetic pace with an active stream
of advocacy work and consultation responses, publications of
key reports and papers, networking events and education and
training initiatives across all regions and areas of activity.
The rest of the year is shaping up to pose interesting challenges
with elections and potential political uncertainty on the horizon
both in the US and Europe. While the US process will most
likely set the geopolitical tone, closer to home our own agenda
will be more closely aligned with the mandate of the incoming
European Commission and direction of the UK Smarter Regulatory
Framework for Financial Services agenda.
We expect increasingly strong focus on the buy side from the
regulatory programme and will be very active in this through
our relevant committees and also in partnership with other
trade associations where relevant. The NBFI universe is of
course highly eclectic and heterogeneous and it is critical that
the impact of each sub-group of players on market stability is
carefully assessed and treated on its own merits. While there is
certainly a need to address concentration, liquidity management
and leverage in certain corners of the market, the regulatory
slide rule should be applied carefully to ensure markets remain
efficient and investor activity not unduly impaired. With so much
focus on developing and deepening capital markets, it would be
counter-productive to arrive at overly prescriptive and restrictive
regulation on parts of the buy side that already evidence strong
oversight, self-governance and discipline aligned with best market
outcomes.
Accelerated settlement remains a key focus and concern for many
of our members and area of activity for our staff. Regulatory
bodies in the EU and the UK have set out their stall in terms of
transition to T+1 and will be closely watching the impact of the
US move (along with Canada and Mexico) at the end of May. As
part of this assessment it is of critical importance that clear and
prescriptive cost-benefit analysis remains central to the process.
We have been encouraged so far by the degree of engagement
with industry on this topic and are keen to see interaction
continuing in a similar vein to ensure best outcomes. Along
with other industry bodies, we also actively advocate for close
coordination between authorities across Europe.
On the membership front, I have had the great pleasure of
participating in a large number of regional member lunches with
many of you since the start of the year and have been struck by
the quality of the interaction, great ideas generated and genuine
camaraderie around the table (or tables). These gatherings
are of great value to all not just for the networking but also in
helping to guide and influence ICMA’s work and priorities to align
with members’ needs. I look forward to seeing many more of you
in this format in the coming weeks and months.
Our AGM and Annual Conference in Brussels in May – and
subsequently those of the Principles in Amsterdam in June – are
now fast approaching and promise again to be key convening
events in the international fixed income calendar. We will
also celebrate 25 years of the European Repo and Collateral
Council (ERCC) with a commemorative dinner in London this
month, a fitting tribute to the leading industry forum driving
the European repo market since the turn of the century. It is
certainly also worth noting that our very successful China Bond
Market Forum held in Beijing last month enabled us to bring
together over 400 domestic and international practitioners
and regulators to debate market matters of key importance
in China’s vast and increasingly important bond market. This
should remind us clearly of how important such broad-based
gatherings continue to be to foster effective engagement and
progress, especially when geopolitical factors may be unhelpful.
Continuing on the topic of progress I will close by mentioning
two very important and unrelated developments. The first
was the final cessation of GBP LIBOR on 28 March where ICMA
has played a central role over a number of years as Chair of
the Bond Market Sub-Group of the Risk-Free Rate Working
Group under the auspices of the UK authorities. And secondly,
the recent incorporation of ICMA’s Bond Data Taxonomy
(BDT) into the recent multi-tranche digital green bond issued
by the Hong Kong SAR Government, the first such usage of
this securities-lifecycle, machine-readable standardisation
framework by an SSA borrower and a very important step in
market digitalisation. Many congratulations and thanks to
our members, stakeholders and my colleagues who have been
involved in both of these notable achievements.

ICMA

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