The week the Fed paused

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◆ Should markets rejoice or worry? ◆ FIG borrowers are gung-ho ◆ Topping rates poses quandary for EM ◆ CLO investors sort sheep from goats

Capital markets of all stripes wrestled this week with one question: what happens next to interest rates? Each market had its own interpretation, and they were surprisingly different.

Public sector bond specialists worried about how the Federal Reserve and European Central Bank’s ambiguous behaviour will affect deal appetite. Financial institutions are loving it and cracking on early with next year’s funding, while corporate borrowers are finding investors want just one thing: spread.

For emerging markets the stakes are much higher and the gambles issuers have to make much riskier. And we hear from the European CLO market, where investors are beginning to do what might seem obvious: distinguish between different CLO managers.